Back to top

Image: Shutterstock

What You Need to Know About EIA's Crude Inventory Report

Read MoreHide Full Article

U.S. oil prices moved higher on Dec 8 as easing concerns on the demand outlook post the spread of the coronavirus Omicron variant outweighed the smaller-than-expected fall in domestic oil stocks and sizable build-ups in fuel inventories.

On the New York Mercantile Exchange, WTI crude futures gained 31 cents, or 0.4%, to settle at $72.36 a barrel, its highest finish since Nov 24.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Dec 3.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories edged down 241,000 barrels compared to expectations of a 1.2 million-barrel decrease per the analysts surveyed by S&P Global Platts. A pullback in imports and higher refinery demand primarily accounted for the stockpile draw with the world’s biggest oil consumer even as an uptick in production and sharply lower exports limited the quantum of decline. Total domestic stocks now stand at 432.9 million barrels — 14% less than the year-ago figure and 7% lower than the five-year average.

On a somewhat bearish 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 up 2.4 million barrels to 30.9 million barrels.

Meanwhile, the crude supply cover was down from 27.9 days in the previous week to 27.7 days. In the year-ago period, the supply cover was 35.6 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the second week in a row. The 3.9-million-barrel addition is attributable to higher refinery runs. Analysts had forecast that gasoline inventories would rise by 1.4 million barrels. At 219.3 million barrels, the current stock of the most widely used petroleum product is 7.8% less than the year-earlier level and 5% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the second week in succession. The 2.7-million-barrel increase primarily reflected higher production and a decline in demand. Meanwhile, the market looked for a supply climb of 900,000 barrels. Current inventories — at 126.6 million barrels — are 16.2% below the year-ago level and 7% lower than the five-year average.

Refinery Rates: Refinery utilization, at 89.8%, moved up 1% from the prior week.

Final Words

WTI settled slightly higher yesterday, as fears of a slowdown in oil demand recovery from the Omicron variant subsided with the strain likely to be less deadly than expected, while available vaccines might be effective in neutralizing it. In fact, oil settled at a two-week high as investors looked past a bearish inventory report showing builds in gasoline and distillate inventories, as well as higher domestic production.

While there are reasons to be cautious, the overall Oil/Energy market looks well-positioned 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 nearly 14% since mid-March. Taking Cushing as an indicator, the oil market has already tightened considerably. Stocks fell to 26.4 million barrels at the key storage hub last month, the lowest in more than three years. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel. In fact, strong consumption of gasoline pushed inventories to the lowest level in four years just two weeks ago.

To take advantage of oil’s robust outlook, one might build a position by tapping into the below-mentioned Zacks Rank #1 (Strong Buy) oil companies.

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

ConocoPhillips (COP - Free Report) : ConocoPhillips has a projected earnings growth rate of 712.4% for the current year. The Zacks Consensus Estimate for COP’s current-year earnings has been revised 16.9% upward over the past 60 days.

ConocoPhillips beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 13%. ConocoPhillips shares have gained around 79.1% in a year.

HollyFrontier : HollyFrontier has an expected earnings growth rate of 355.2% for the current year. The Zacks Consensus Estimate for HFC's current-year earnings has been revised 72.1% upward over the last 60 days.

HollyFrontier beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed it twice. It has a trailing four-quarter earnings surprise of roughly 20.9%, on average. HFC has gained around 22.7% in a year.

Occidental Petroleum (OXY - Free Report) : Occidental Energy has an expected earnings growth rate of 153.5% for the current year. The Zacks Consensus Estimate for Occidental Energy's current-year earnings has been revised 47.2% upward over the last 60 days.

Occidental Energy beat the Zacks Consensus Estimate for earnings in two of the last four quarters. OXY has a trailing four-quarter earnings surprise of roughly 13.7%, on average. The Canadian oil behemoth has rallied around 61.1% in a year.

PDC Energy (PDCE - Free Report) : The company has a projected earnings growth rate of 285.2% for the current year. PDC Energy’s consensus estimate for the current year has been revised 24.9% upward over the past 60 days.

PDCE beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 51.1%. PDC Energy has rallied around 183% in a year.

 


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


ConocoPhillips (COP) - free report >>

Occidental Petroleum Corporation (OXY) - free report >>

PDC Energy, Inc. (PDCE) - free report >>