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Energy Stocks Move Higher After EIA Reports Big Crude Draw

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a big drawdown. On a further positive note, the report revealed that gasoline inventories declined from their previous week levels.

The upbeat sentiment on the back of these data sets buoyed WTI crude futures, which gained 40 cents, or 0.8%, to settle at $48.40 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the holiday-shortened week ending Dec 25.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 6.1 million barrels compared with expectations of a 3.8-million-barrel decrease. A jump in exports and higher refinery activity primarily accounted for the massive stockpile draw with the world’s biggest oil consumer. This puts total domestic stocks at 493.5 million barrels — 14.8% more than the year-ago figure and 11% higher than the five-year average.

On a somewhat bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) edged up 27,000 barrels to 58.4 million barrels.

Meanwhile, the crude supply cover was down from 35.3 days in the previous week to 34.7 days. In the year-ago period, the supply cover was 25.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the second running week. The 1.2-million-barrel draw was attributable to an uptick in consumption, which rose by 106,000 barrels per day during the week under review. Analysts had forecast gasoline inventories to rise by 2.3 million barrels. At 236.6 million barrels, the current stock of the most widely used petroleum product is 2.4% lower than the year-earlier level but remains 1% above the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the fourth time in five weeks. The 3.1-million-barrel build reflected a slide in demand. Meanwhile, the market looked for a supply increase of 1.3 million barrels. Current inventories — at 152 million barrels — are 13.7% higher than the year-ago level and 6% higher than the five-year average.

Refinery Rates: Refinery utilization was up 1.4% from the prior week to 79.4%.

Wrap Up

Oil has been rallying for the past few months on continued vaccine-related developments that offer hope for an earlier-than-expected pickup in the commodity’s demand. Following a flurry of positive updates, the FDA, this month, granted emergency use authorization to Pfizer-BioNTech and Moderna’s COVID-19 vaccines. The move is seen as a big step against the pandemic that has crushed the commodity’s demand and caused a bloodbath in energy-related stocks. A vaccine is expected to revive economic and transport activity next year, leading to stronger crude demand.

Oil got another leg up yesterday after U.S. government data revealed a weekly drop in domestic crude inventories, which was much larger than expected, along with a surprise decline in gasoline stockpiles. The bullish headlines pushed the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — up nearly 1.6% on Wednesday to be at the top of the S&P sector standings. In fact, some of the major gainers of the S&P 500 included energy-related names like Devon Energy (DVN - Free Report) , Diamondback Energy (FANG - Free Report) , Occidental Petroleum (OXY - Free Report) , EOG Resources (EOG - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Marathon Oil (MRO - Free Report) . Devon Energy was the top-performing stock with a gain of 5.4%, followed by Diamondback Energy (4.8%), Occidental Petroleum (3.9%), EOG Resources (3.9%), Pioneer Natural Resources (3.6%) and Marathon Oil (7.5%). Meanwhile, the only energy representative in the 30-stock Dow Jones industrial average, Chevron (CVX - Free Report) — carrying a Zacks Rank of #3 (Hold) — edged up 0.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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