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Energy Stocks Follow Oil Lower on Crude Inventory Build

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U.S. oil prices slid on Wednesday, as rising inventories and the surging pandemic in India — the world's third-largest crude importer and consumer — outweighed stronger gasoline and distillate demands. On the New York Mercantile Exchange, WTI crude futures lost $2.13 or 3.3%, to settle at $63.36 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending May 14.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 1.3 million barrels compared with expectations of a 2.9-million-barrel decline. A jump in imports primarily accounted for the surprise stockpile build with the world’s biggest oil consumer. This puts the total domestic stocks at 486 million barrels — 7.7% less than the year-ago figure and 1% lower 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) were down 142,000 barrels to 45.8 million barrels.

Meanwhile, the crude supply cover was down marginally from 32.3 days in the previous week to 32.2 days. In the year-ago period, the supply cover was 41.3 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the first time in seven weeks. The 2-million-barrel draw is attributable to a substantial increase in demand that reached the highest level since March 2020. Analysts had forecast gasoline inventories to rise by 600,000 barrels. At 234.2 million barrels, the current stock of the most widely used petroleum product is 8.4% less than the year-earlier level and 2% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) decreased for the sixth consecutive week. The 2.3-million-barrel decline reflected incremental demand. Meanwhile, the market looked for a supply drop of 200,000 barrels. Current inventories — at 132.1 million barrels — are at their lowest since April 2020, 16.8% below the year-ago level and 5% less than the five-year average.

Refinery Rates: Refinery utilization, at 85%, was up 1.3% from the prior week.

Wrapping Up

Oil prices settled lower on Wednesday, following an unexpected build in inventories after two weeks of decline. Crude demand is also facing new challenges from another wave of lockdowns and restrictions across large parts of Asia such as India, Japan and Thailand. Of particular concern is the COVID-19 resurgence in India that is likely to slow the oil consumption recovery.

On top of the demand issues, there were reports on the progress of U.S.-Iran nuclear deal talks (or probability of more oil coming back to the market), which were enough to push the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — down 2.5% on Wednesday. Consequently, some of the biggest casualties of the S&P 500 included energy-related names like NOV Inc. (NOV - Free Report) , APA Corporation (APA - Free Report) , Devon Energy (DVN - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) , Schlumberger (SLB - Free Report) and Halliburton (HAL - Free Report) .

NOV was the worst-performing energy stock with a loss of 5.34%, followed by APA (3.92%), Devon (3.66%), Pioneer Natural Resources (3.33%), Schlumberger (3.24%) and Halliburton (3.22%). Meanwhile, the only energy representative in the 30-stock Dow Jones industrial average, Chevron (CVX - Free Report) , carrying a Zacks Rank of #3 (Hold) — was down 2.81%.

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