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Key Reasons Why U.S. Oil Prices Have Been Volatile Lately
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In a volatile turnaround, U.S. oil prices fell into correction territory on Tuesday in less than three weeks after hitting a nearly two-year high. At $58.56 a barrel, the contract is off more than 11% from its recent high above $66 on Mar 5. Apart from concerns over the reimposition of lockdowns in Europe and a slow rollout of the AstraZeneca COVID-19 vaccine, prices have been dragged down by the latest U.S. government data showing another weekly build in crude, gasoline and distillate supplies. The obstruction of oil traffic along the strategic Suez Canal following the grounding of a massive container ship stoked further uncertainty about the market.
Below we review the EIA's Weekly Petroleum Status Report for the holiday-shortened week ending Mar 19.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 1.9 million barrels compared with expectations of a 1.7 million-barrels increase. The continued revival in domestic production from February’s winter storm-led shut-ins and the underwhelming recovery in refinery demand primarily accounted for the higher-than-expected stockpile build with the world’s biggest oil consumer. This puts total domestic stocks at 502.7 million barrels — 10.4% more than the year-ago figure and 6% higher than the five-year average.
On a somewhat positive 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) fell 1.9 million barrels to 46.3 million barrels.
Meanwhile, the crude supply cover was down from 41.8 days in the previous week to 40.2 days. In the year-ago period, the supply cover was 28.9 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies logged their second consecutive weekly climb. The 204,000-barrels build is attributable to stagnating demand recovery on account of the pandemic’s newest wave. Analysts had forecast gasoline inventories to rise by 900,000 million barrels. At 232.3 million barrels, the current stock of the most widely used petroleum product is 2.9% less than the year-earlier level and 3% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) also rose for the second week in a row. The increase of 3.8 million barrels reflected ramped-down usage. Meanwhile, the market looked for a supply addition of 200,000 barrels. Current inventories — at 141.6 million barrels — are 13.8% higher than the year-ago level and 1% more than the five-year average.
Refinery Rates: Refinery utilization was up 5.5% from the prior week to 81.6%.
Wrapping Up
Oil prices remain under pressure as crude and product inventories rose for the second week running, pointing to the still-fragile fundamentals in the energy market. In particular, the last four-week average for petroleum demand stands at 18.8 million barrels a day, 10.7% below year-ago levels with jet fuel usage down 35.4%. Oil is not out of the woods just yet, as a number of European nations have imposed lockdowns aimed at slowing the spread of a third wave of the contagion, thereby threatening the rebound in fuel demand. Further, a scare over blood clots related to the use of AstraZeneca vaccine saw several countries slow down/temporarily suspend its rollout, which compounded the bearish sentiment in the energy market.
The commodity, however, had spent much of the past few months trading higher on continued vaccine-related developments and their successful deployment around the world that offers hope for an earlier-than-expected pickup in the commodity’s demand. Oil was driven up further after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. Recently, the OPEC+ alliance decided to continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day. Easing coronavirus infections, signs of robust demand in the world’s second-largest oil consumer, China, and the passage of the $1.9 trillion stimulus bill are the other positives in the oil story.
The renewed confidence can be gauged from the fact that the Zacks Oil/Energy sector has gained 16.2% so far this year, handily outperforming the S&P 500 Index’s 3.9% appreciation. Further, the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — is up nearly 30% during this period to be at the top of the S&P sector standings.
In fact, some of the major gainers of the S&P 500 this year include energy-related names like Marathon Oil (MRO - Free Report) , Occidental Petroleum (OXY - Free Report) , Diamondback Energy (FANG - Free Report) , EOG Resources (EOG - Free Report) and Devon Energy (DVN - Free Report) .
Marathon is the top-performing energy stock with a gain of 57.87%, followed by Occidental (54.25%), Diamondback (52.48%), EOG (46.46%) and Devon (42.46%). Meanwhile, the only energy representative in the 30-stock Dow Jones industrial average, Chevron (CVX - Free Report) , carrying a Zacks Rank of #3 (Hold) —is up 24.42%.
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Bigstock
Key Reasons Why U.S. Oil Prices Have Been Volatile Lately
In a volatile turnaround, U.S. oil prices fell into correction territory on Tuesday in less than three weeks after hitting a nearly two-year high. At $58.56 a barrel, the contract is off more than 11% from its recent high above $66 on Mar 5. Apart from concerns over the reimposition of lockdowns in Europe and a slow rollout of the AstraZeneca COVID-19 vaccine, prices have been dragged down by the latest U.S. government data showing another weekly build in crude, gasoline and distillate supplies. The obstruction of oil traffic along the strategic Suez Canal following the grounding of a massive container ship stoked further uncertainty about the market.
Below we review the EIA's Weekly Petroleum Status Report for the holiday-shortened week ending Mar 19.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 1.9 million barrels compared with expectations of a 1.7 million-barrels increase. The continued revival in domestic production from February’s winter storm-led shut-ins and the underwhelming recovery in refinery demand primarily accounted for the higher-than-expected stockpile build with the world’s biggest oil consumer. This puts total domestic stocks at 502.7 million barrels — 10.4% more than the year-ago figure and 6% higher than the five-year average.
On a somewhat positive 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) fell 1.9 million barrels to 46.3 million barrels.
Meanwhile, the crude supply cover was down from 41.8 days in the previous week to 40.2 days. In the year-ago period, the supply cover was 28.9 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies logged their second consecutive weekly climb. The 204,000-barrels build is attributable to stagnating demand recovery on account of the pandemic’s newest wave. Analysts had forecast gasoline inventories to rise by 900,000 million barrels. At 232.3 million barrels, the current stock of the most widely used petroleum product is 2.9% less than the year-earlier level and 3% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) also rose for the second week in a row. The increase of 3.8 million barrels reflected ramped-down usage. Meanwhile, the market looked for a supply addition of 200,000 barrels. Current inventories — at 141.6 million barrels — are 13.8% higher than the year-ago level and 1% more than the five-year average.
Refinery Rates: Refinery utilization was up 5.5% from the prior week to 81.6%.
Wrapping Up
Oil prices remain under pressure as crude and product inventories rose for the second week running, pointing to the still-fragile fundamentals in the energy market. In particular, the last four-week average for petroleum demand stands at 18.8 million barrels a day, 10.7% below year-ago levels with jet fuel usage down 35.4%. Oil is not out of the woods just yet, as a number of European nations have imposed lockdowns aimed at slowing the spread of a third wave of the contagion, thereby threatening the rebound in fuel demand. Further, a scare over blood clots related to the use of AstraZeneca vaccine saw several countries slow down/temporarily suspend its rollout, which compounded the bearish sentiment in the energy market.
The commodity, however, had spent much of the past few months trading higher on continued vaccine-related developments and their successful deployment around the world that offers hope for an earlier-than-expected pickup in the commodity’s demand. Oil was driven up further after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. Recently, the OPEC+ alliance decided to continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day. Easing coronavirus infections, signs of robust demand in the world’s second-largest oil consumer, China, and the passage of the $1.9 trillion stimulus bill are the other positives in the oil story.
The renewed confidence can be gauged from the fact that the Zacks Oil/Energy sector has gained 16.2% so far this year, handily outperforming the S&P 500 Index’s 3.9% appreciation. Further, the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — is up nearly 30% during this period to be at the top of the S&P sector standings.
In fact, some of the major gainers of the S&P 500 this year include energy-related names like Marathon Oil (MRO - Free Report) , Occidental Petroleum (OXY - Free Report) , Diamondback Energy (FANG - Free Report) , EOG Resources (EOG - Free Report) and Devon Energy (DVN - Free Report) .
Marathon is the top-performing energy stock with a gain of 57.87%, followed by Occidental (54.25%), Diamondback (52.48%), EOG (46.46%) and Devon (42.46%). Meanwhile, the only energy representative in the 30-stock Dow Jones industrial average, Chevron (CVX - Free Report) , carrying a Zacks Rank of #3 (Hold) —is up 24.42%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>