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EIA Oil Supply Data Headlines: Crude Stocks Down, Fuel Up

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U.S. oil prices climbed marginally yesterday, as investors looked past the Energy Information Administration’s ("EIA") rising gasoline and distillate supplies and turned their attention to the second successive weekly crude stockpile draw.

On the New York Mercantile Exchange, WTI crude futures edged up 44 cents or 0.7%, to settle at $59.77 a barrel on Wednesday.

Below we review the EIA's Weekly Petroleum Status Report for the holiday-shortened week ending Apr1.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 3.5 million barrels compared with expectations of a 700,000-barrel decrease. A spike in refinery demand primarily accounted for the higher-than-expected stockpile draw with the world’s biggest oil consumer. This puts total domestic stocks at 498.3 million barrels — 2.9% more than the year-ago figure and 3% higher than the five-year average.

On a further 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) were down 735,000 barrels to 46.3 million barrels.

Meanwhile, the crude supply cover was down from 36.4 days in the previous week to 34.5 days. In the year-ago period, the supply cover was 32.2 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the third time in four weeks. The 4 million-barrels build is attributable to stagnating demand recovery on account of the pandemic’s newest wave. Analysts had forecast gasoline inventories to rise by 200,000 million barrels. At 234.6 million barrels, the current stock of the most widely used petroleum product is 8.8% less than the year-earlier level and 2% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the fourth week in a row. The increase of 1.5 million barrels reflected ramped-down usage. Meanwhile, the market looked for a supply addition of 500,000 barrels. Current inventories — at 145.5 million barrels — are 18.6% higher than the year-ago level and 5% more than the five-year average.

Refinery Rates: Refinery utilization was up 0.1% from the prior week to 84%.

Wrapping Up

Oil prices settled marginally higher on Wednesday following a bigger-than-expected decline in crude inventories. But in a worrying sign, product inventories rose, pointing to the still-fragile fundamentals in the energy market. In particular, 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. The OPEC+ cartel’s calibrated production policy has also driven up oil. In its recent meeting, member countries of the OPEC+ group — a coalition between OPEC countries under kingpin Saudi Arabia and non-members led by Russia — decided to gradually loosen the output cuts from May through July, reflecting their confidence in the fuel’s demand.

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 17.3% so far this year, handily outperforming the S&P 500 Index’s 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) , Diamondback Energy (FANG - Free Report) , EOG Resources (EOG - Free Report) , Occidental Petroleum (OXY - Free Report) and Devon Energy (DVN - Free Report) .

Marathon is the top-performing energy stock with a gain of 64%, followed by Diamondback (57.7%), EOG (47%), Occidental (46.2%) and Devon (42.5%). Meanwhile, the only energy representative in the 30-stock Dow Jones industrial average, Chevron (CVX - Free Report) , carrying a Zacks Rank of #1 (Strong Buy) — is up 23.4%.

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


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