U.S. crude prices ended sharply lower Wednesday after a weekly report from the Energy Information Administration ("EIA") showed builds in crude and distillate stockpiles. The possible release of crude by the International Energy Agency (“IEA”) into the commercial market also dragged prices down, while a stronger greenback, which can weaken dollar-denominated commodities like oil, played its part too.

On the New York Mercantile Exchange, WTI crude futures tumbled 5.6% to settle at $96.23 a barrel. That marked the lowest close since Mar 16.

Before going into the other factors, let's dig deep into the EIA's Weekly Petroleum Status Report for the week ending Apr 1.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 2.4 million barrels compared to expectations of a 1.85 million-barrel decrease per the analysts surveyed by S&P Global Platts. The combination of higher production and a slight increase in imports accounted for the unexpected stockpile build with the world’s biggest oil consumer even as exports zoomed. Total domestic stocks now stand at 412.4 million barrels — 17.2% less than the year-ago figure and 14% 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) increased 1.7 million barrels to 25.9 million barrels.

Meanwhile, the crude supply cover was down from 26.1 days in the previous week to 26 days. In the year-ago period, the supply cover was 34.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the eighth time in nine weeks. The 2-million-barrel drop was attributable to higher demand and exports, as well as lower imports. Analysts had forecast that gasoline inventories would fall by 350,000 barrels. At 236.8 million barrels, the current stock of the most widely used petroleum product is 0.9% more than the year-earlier level and 1% above the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the second week in succession. The 771,000-barrel uptick primarily reflected demand weakness. Current inventories — at 114.3 million barrels — are 21.4% below the year-ago level and 15% lower than the five-year average.

Refinery Rates: Refinery utilization, at 92.5%, rose 1% from the prior week.

Final Words

Oil prices ended below $100 yesterday, primarily on concerns of additional supply coming from the IEA. The energy watchdog authorized the release of 120 million barrels from strategic reserves, which includes 60 million from the United States. This 60 million is part of America’s own plan to tap its Strategic Petroleum Reserve (“SPR”). In an all-out effort to keep a lid on soaring pump prices, President Biden recently announced an emergency drawdown of one million barrels of oil per day for six months from May from SPR. The SPR is a massive supply of government crude that is used in unforeseen circumstances. In fact, it’s the SPR story (or the possibility of 180 million barrels of more oil) that sent the market lower.

Despite yesterday’s losses, the Oil/Energy market continues to enjoy support from geopolitical uncertainty amid Russia’s military operations in Ukraine. Last month, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity. The Biden administration’s ban on the import of Russian crude and energy products contributed to oil’s rapid price increase. Agreed, crude has pulled back from those lofty levels but with the conflict showing no signs of a quick resolution and speculation that the European Union could follow the United States in blocking imports of Russian energy — even at the detriment of their economies — is giving fresh impetus to the oil bulls.

Even the fundamentals point to a tightening of the market. Per the latest government report, U.S. commercial stockpiles have been down more than 17% in a year, prompted by the demand spike owing to the reopening of economies and a rebound in activity.

As a matter of fact, the Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 37.7% year to date against an 4.3% loss for the broader S&P 500 benchmark.

Consequently, three of the top four gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum (OXY Quick QuoteOXY - Free Report) , Halliburton (HAL Quick QuoteHAL - Free Report) and APA Corporation (APA Quick QuoteAPA - Free Report) .

Occidental Petroleum: OXY, carrying a Zacks Rank of #1 (Strong Buy), is the top-performing S&P 500 stock in 2022 with a gain of 93.5%. Occidental Petroleum’s expected EPS growth rate for three to five years is currently 33.7%, which compares favorably with the industry's growth rate of 22.6%.

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

OXY has a projected earnings growth rate of 122.8% for this year. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has been revised 47.2% upward over the past 60 days.

Halliburton: This Zacks Rank #2 (Buy) stock has jumped 63.3% year to date. The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 9%.

Halliburton is valued at around $33.7 billion. HAL has a projected earnings growth rate of 67.6% for this year.

APA: This Zacks Rank #3 (Hold) stock was the fourth-best performer in the S&P 500 Index, with shares appreciating 51.8% so far in 2022. APA has a projected earnings growth rate of 87.4% for this year.

The Zacks Consensus Estimate for APA’s 2022 earnings has been revised 10.8% upward over the past 60 days. APA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 13.4%.