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Oil Rises After EIA Reports Inventory Draw on All Fronts

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U.S. oil prices increased yesterday after U.S. government data showed a weekly draw in crude, gasoline and distillate supplies. In particular, the commodity was buoyed by signs of strong demand. However, the surging pandemic in India — the world's third-largest crude importer and consumer — and the potential revival of more Iranian exports tempered the gains.

On the New York Mercantile Exchange, WTI crude futures gained 14 cents or 0.2%, to settle at $66.21 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending May 21.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.7 million barrels compared with expectations of a 2.2-million-barrel decline. An uptick in refinery demand primarily accounted for the stockpile draw with the world’s biggest oil consumer. This puts the total domestic stocks at 484.3 million barrels — 9.4% less than the year-ago figure and 2% lower 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 about 1 million barrels to 44.8 million barrels.

Meanwhile, the crude supply cover was down marginally from 32.2 days in the previous week to 32 days. In the year-ago period, the supply cover was 41.7 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the second time in as many weeks. The 1.7-million-barrel draw is attributable to another substantial increase in demand. Analysts had forecast gasoline inventories to fall by 700,000 barrels. At 232.5 million barrels, the current stock of the most widely used petroleum product is 8.8% less than the year-earlier level and 3% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) decreased for the seventh consecutive week. The 3-million-barrel decline reflected incremental demand. Meanwhile, the market looked for a supply drop of 1.6 million barrels. Current inventories — at 129.1 million barrels — are 21.4% below the year-ago level and 8% less than the five-year average.

Refinery Rates: Refinery utilization, at 87%, was up 2% from the prior week.

Wrapping Up

Crude prices settled marginally higher on Wednesday as investors looked past challenges from the COVID-19 resurgence in India and the probability of more Iranian oil coming back to the market and turned their attention to the improving fundamentals in the fuel market. While oil supplies declined to a three-month low, gasoline consumption was at the highest since March last year. Moreover, distillate stockpiles reached the lowest level since April 2020.

The renewed confidence can be gauged from the fact that the Zacks Oil/Energy sector has gained 20.6% so far this year, outperforming the S&P 500 Index’s 12.2% appreciation. In fact, some of the major gainers of the S&P 500 this year include energy-related names like Marathon Oil (MRO - Free Report) , Devon Energy (DVN - Free Report) , Diamondback Energy (FANG - Free Report) , EOG Resources (EOG - Free Report) and Hess Corporation (HES - Free Report) .

Marathon is the top-performing energy stock with a gain of 78.41%, followed by Devon (68.34%), Diamondback (61.76%), EOG (59.61%) and Hess (59.12%). 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 23.29%.

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

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