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Oil Rally Takes a Breather Amid Rising Supplies on All Fronts
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U.S. oil prices edged lower on Wednesday, underpinned by a report from the Energy Information Administration ("EIA") that showed a stockpile build. This comes on the heels of seven consecutive weeks of inventory drawdowns. The latest government data also showed an increase in fuel (gasoline and distillate) supplies. On the New York Mercantile Exchange, WTI crude futures lost 45 cents or 0.6%, to settle at $74.84 a barrel. Furthermore, a stronger dollar made oil more expensive to the holders of other currencies and dragged down the commodity.
Below we review the EIA's Weekly Petroleum Status Report for the week ending Sep 24.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 4.6 million barrels compared to the expectations of a 4.5-million-barrel decline per the analysts surveyed by S&P Global Platts. The combination of a recovery in domestic production from the storm-led shut-ins in the Gulf of Mexico and a slight increase in imports accounted for the surprise stockpile build with the world’s biggest oil consumer even as refinery activity improved. This puts total domestic stocks at 418.5 million barrels — 15% less than the year-ago figure and 7% 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 up some 200,000 barrels to 34 million barrels.
Meanwhile, the crude supply cover was up from 27.6 days in the previous week to 28.2 days. In the year-ago period, the supply cover was 37 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies increased for the second week in a row. The 200,000-barrel addition is attributable to returning production after the hurricane fallout. Analysts had forecast that gasoline inventories would rise by 700,000 barrels. At 221.8 million barrels, the current stock of the most widely used petroleum product is 2.8% less than the year-earlier level and 3% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the first time in five weeks. The 400,000-barrel increase reflected higher production and lower demand. Meanwhile, the market looked for a supply decline of 2.2 million barrels. Current inventories — at 129.7 million barrels — are 24.9% below the year-ago level and 12% lower than the five-year average.
Refinery Rates: Refinery utilization, at 88.1%, moved up 0.6% from the prior week.
Final Words
Oil prices settled lower yesterday following a build in crude and fuel inventories, plus a robust greenback. Despite some disappointment with the latest numbers, the overall Oil/Energy market is on the mend with a supportive macro backdrop and robust fundamentals. Widespread COVID-19 vaccine rollouts, the ongoing government stimulus and the OPEC+ supply curtailments have contributed to this positive setup.
Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down some 17% since mid-March. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel. With all the tailwinds, the U.S. benchmark hit a nearly three-year high settlement of $75.45 on Monday.
The Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 44.2% year to date against an 18.3% gain for the broader S&P 500 benchmark. As far as companies within the index are concerned, oil stocks like Devon Energy (DVN - Free Report) , Marathon Oil (MRO - Free Report) , Diamondback Energy (FANG - Free Report) , Occidental Petroleum (OXY - Free Report) , ConocoPhillips (COP - Free Report) and EOG Resources (EOG - Free Report) have done well so far this year.
Devon Energy, carrying a Zacks Rank #3 (Hold), is the top-performing energy stock with a gain of 132.79%. Marathon, Diamondback, Occidental, ConocoPhillips and EOG have also enjoyed outsized gains of 106.75%, 98.45%, 73.48%, 70.14% and 67.68%, respectively.
Image: Bigstock
Oil Rally Takes a Breather Amid Rising Supplies on All Fronts
U.S. oil prices edged lower on Wednesday, underpinned by a report from the Energy Information Administration ("EIA") that showed a stockpile build. This comes on the heels of seven consecutive weeks of inventory drawdowns. The latest government data also showed an increase in fuel (gasoline and distillate) supplies. On the New York Mercantile Exchange, WTI crude futures lost 45 cents or 0.6%, to settle at $74.84 a barrel. Furthermore, a stronger dollar made oil more expensive to the holders of other currencies and dragged down the commodity.
Below we review the EIA's Weekly Petroleum Status Report for the week ending Sep 24.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 4.6 million barrels compared to the expectations of a 4.5-million-barrel decline per the analysts surveyed by S&P Global Platts. The combination of a recovery in domestic production from the storm-led shut-ins in the Gulf of Mexico and a slight increase in imports accounted for the surprise stockpile build with the world’s biggest oil consumer even as refinery activity improved. This puts total domestic stocks at 418.5 million barrels — 15% less than the year-ago figure and 7% 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 up some 200,000 barrels to 34 million barrels.
Meanwhile, the crude supply cover was up from 27.6 days in the previous week to 28.2 days. In the year-ago period, the supply cover was 37 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies increased for the second week in a row. The 200,000-barrel addition is attributable to returning production after the hurricane fallout. Analysts had forecast that gasoline inventories would rise by 700,000 barrels. At 221.8 million barrels, the current stock of the most widely used petroleum product is 2.8% less than the year-earlier level and 3% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the first time in five weeks. The 400,000-barrel increase reflected higher production and lower demand. Meanwhile, the market looked for a supply decline of 2.2 million barrels. Current inventories — at 129.7 million barrels — are 24.9% below the year-ago level and 12% lower than the five-year average.
Refinery Rates: Refinery utilization, at 88.1%, moved up 0.6% from the prior week.
Final Words
Oil prices settled lower yesterday following a build in crude and fuel inventories, plus a robust greenback. Despite some disappointment with the latest numbers, the overall Oil/Energy market is on the mend with a supportive macro backdrop and robust fundamentals. Widespread COVID-19 vaccine rollouts, the ongoing government stimulus and the OPEC+ supply curtailments have contributed to this positive setup.
Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down some 17% since mid-March. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel. With all the tailwinds, the U.S. benchmark hit a nearly three-year high settlement of $75.45 on Monday.
The Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 44.2% year to date against an 18.3% gain for the broader S&P 500 benchmark. As far as companies within the index are concerned, oil stocks like Devon Energy (DVN - Free Report) , Marathon Oil (MRO - Free Report) , Diamondback Energy (FANG - Free Report) , Occidental Petroleum (OXY - Free Report) , ConocoPhillips (COP - Free Report) and EOG Resources (EOG - Free Report) have done well so far this year.
Devon Energy, carrying a Zacks Rank #3 (Hold), is the top-performing energy stock with a gain of 132.79%. Marathon, Diamondback, Occidental, ConocoPhillips and EOG have also enjoyed outsized gains of 106.75%, 98.45%, 73.48%, 70.14% and 67.68%, respectively.
You can see the complete list of today’s Zacks #1 Rank stocks here.