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Making Sense of EIA's Latest Weekly Crude Inventory Report

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U.S. oil prices moved lower on Wednesday, underpinned by a report from the Energy Information Administration ("EIA") that showed a second straight stockpile build. The latest government data also showed an increase in gasoline inventories. On the New York Mercantile Exchange, WTI crude futures lost $1.50 or 1.9%, to settle at $77.43 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Oct 1.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 2.3 million barrels compared to expectations of a 200,000 barrel increase 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, lower exports and an uptick in imports accounted for the larger-than-expected stockpile build with the world’s biggest oil consumer even as refinery activity improved. This puts total domestic stocks at 420.9 million barrels — 14.6% 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 1.5 million barrels to 35.5 million barrels.

Meanwhile, the crude supply cover was down from 28.2 days in the previous week to 27.6 days. In the year-ago period, the supply cover was 36.3 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the third week in a row. The 3.3 million-barrel addition is attributable to higher imports. Analysts had forecast that gasoline inventories would fall by 700,000 barrels. At 225.1 million barrels, the current stock of the most widely used petroleum product is 0.7% less than the year-earlier level and 1% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell for the fifth time in six weeks. The 396,000-barrel decrease reflected higher demand. Meanwhile, the market looked for a supply decline of 1.7 million barrels. Current inventories — at 129.3 million barrels — are 24.7% below the year-ago level and 11% lower than the five-year average.

Refinery Rates: Refinery utilization, at 89.6%, moved up 1.5% from the prior week.

Final Words

Oil prices settled lower yesterday, following a build in crude and gasoline inventories. 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+ cartel’s calibrated production policy have contributed to this positive setup.

Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down more than 16% 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 seven-year high settlement of $78.93 on Tuesday.

The Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 48.5% year to date against a 17.9% 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 151.87%. Marathon, Diamondback, Occidental, ConocoPhillips and EOG have also enjoyed outsized gains of 126.24%, 115.10%, 84.86%, 79.57% and 75.80%, respectively.

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