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Oil Stocks Routed on Rising Fuel Supplies, OPEC+ Impasse

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U.S. oil prices slid on Wednesday, as rising fuel inventories and conflicting information on whether Saudi Arabia and the United Arab Emirates have reached a compromise on OPEC+ production standoff outweighed the eighth straight fall in domestic oil stocks.  

On the New York Mercantile Exchange, WTI crude futures moved down $2.12 or 2.8%, to settle at $73.13 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Jul 9.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 7.9 million barrels compared to expectations of a 4.9-million-barrel decline per the analysts surveyed by S&P Global Platts. A surge in exports accounted for the larger-than-expected stockpile draw with the world’s biggest oil consumer. This puts total domestic stocks at 437.6 million barrels — 17.7% less than the year-ago figure and 8% lower than the five-year average.

The latest report also 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 1.6 million barrels at 38.1 million barrels.

Meanwhile, the crude supply cover was down from 27.5 days in the previous week to 27.1 days. In the year-ago period, the supply cover was 37.6 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the second time in three weeks. The 1-million-barrel addition is attributable to a dip in demand even as production fell. Analysts had forecast that gasoline inventories would fall by 1.6 million barrels. At 236.5 million barrels, the current stock of the most widely used petroleum product is 4.8% less than the year-earlier level and 1% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) climbed for the second week in a row. The 3.7-million-barrel rise reflected a decline in demand. Meanwhile, the market looked for a supply gain of 1.3 million barrels. Despite the build, current inventories — at 142.3 million barrels — are 19.5% below the year-ago level and 4% less than the five-year average.

Refinery Rates: Refinery utilization, at 91.8%, was down 0.4% from the prior week.

Wrapping Up

Oil prices settled lower yesterday, following builds in gasoline and distillate inventories due to a decrease in consumption. While the overall Oil/Energy market sentiment remains positive on a continued decline in U.S. commercial stockpiles — down almost 13% since mid-March — the build in fuel supplies is a troubling sign for crude demand. Uncertainty associated with a deal between Saudi Arabia and UAE to get over their dispute regarding OPEC+-mandated output levels also dragged down the commodity on Wednesday.     

These factors were enough to push the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — down 3%. Consequently, some of the biggest casualties of the S&P 500 included energy-related names like Occidental Petroleum (OXY - Free Report) , Diamondback Energy (FANG - Free Report) , Devon Energy (DVN - Free Report) , APA Corporation (APA - Free Report) , Marathon Oil (MRO - Free Report) and Hess Corporation (HES - Free Report) .

Occidental, carrying a Zacks Rank of #3 (Hold), was the worst-performing energy stock with a loss of 7.48%, followed by Diamondback (6.06%), Devon (5.76%), APA (5.60%), Marathon (4.57%) and Hess (4.19%).

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