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EIA Oil Supply Data Headlines: Crude Stocks Up, Fuel Down

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U.S. crude prices ended sharply higher on Thursday as investors looked past the Energy Information Administration’s ("EIA") latest report showing a big stockpile build. Instead, the market took note of the fall in gasoline and distillate supplies and their consistently high demand. On the New York Mercantile Exchange, WTI crude futures gained 4.2% to settle at $102.73 a barrel.

Let's dig deep into the EIA's Weekly Petroleum Status Report for the holiday-shortened week ending Jul 1.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 8.2 million barrels. A sharp drop in exports and jump in imports primarily accounted for the significant stockpile build with the world’s biggest oil consumer even as refinery demand remains robust. Total domestic stocks now stand at 423.8 million barrels — 4.9% less than the year-ago figure and 10% lower than the five-year average.

On a further bearsh 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) edged up 69,000 barrels to 21.3 million barrels.

Meanwhile, the crude supply cover was up from 25.3 days in the previous week to 25.8 days. In the year-ago period, the supply cover was 27.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the twelfth time in 14 weeks. The 2.5 million-barrel drop was attributable to the continued strength in demand. At 219.1 million barrels, the current stock of the most widely used petroleum product is 7% less than the year-earlier level and 8% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell after rising for four weeks. The 1.3 million-barrel decline primarily reflected a pickup in demand. Following the recent supply withdrawal, current inventories — at 111.1 million barrels — are 19.9% below the year-ago level and 20% lower than the five-year average.

Refinery Rates: Refinery utilization, at 94.5%, fell 0.5% from the prior week.

Final Word

Oil prices continue to trade above $100, as lingering supply worries offset concerns about slowing economic growth (and by extension, crude demand).

The Oil/Energy market continues to enjoy support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, 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 the European Union following the United States in blocking imports of Russian energy — even at the detriment of their economies — is giving fresh impetus to the oil bulls.

While there are jitters over soaring inflation and stuttering economic growth, these have been more than offset by the market’s precariously low level of spare capacity, China’s emergence from its strict COVID-19 restrictions, a stretched-out refining system, plus production disruptions in Libya and Ecuador.

Even the fundamentals point to a tightening of the market. Per the latest government report, U.S. commercial stockpiles have been down some 10% from their five-year average for this time of year, prompted by a 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 27.9% year to date against an 18.1% loss for the broader S&P 500 benchmark.

Consequently, the top three gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum (OXY - Free Report) , Coterra Energy (CTRA - Free Report) and Valero Energy (VLO - Free Report) .

Occidental Petroleum: OXY is the top-performing S&P 500 stock in 2022, with a gain of 112%. Occidental Petroleum’s expected EPS growth rate for three to five years is currently 32.3%, which compares favorably with the industry's growth rate of 30.4%.

OXY has a projected earnings growth rate of 315.3% for this year. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has been revised 13.3% upward over the past 60 days.

Corterra Energy: This stock was the second-best performer in the S&P 500 Index, with shares having appreciated 43.3% in 2022. CTRA has a projected earnings growth rate of 88.4% for this year.

The Zacks Consensus Estimate for Corterra Energy’s 2022 earnings has been revised 3.7% upward over the past 60 days. CTRA’s expected EPS growth rate for three to five years is currently 55%, which compares favorably with the industry's growth rate of 26.8%.

Valero Energy: Valero Energy shares have appreciated 41.6% so far in 2022. VLO, carrying a Zacks Rank of #1 (Strong Buy), has a projected earnings growth rate of 511.4% for this year.

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

The Zacks Consensus Estimate for Valero Energy’s 2022 earnings has been revised 34.7% upward over the past 60 days. VLO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 84.3%.

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