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U.S. Oil Prices Rise as EIA Confirms a Big Inventory Draw

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U.S. oil prices moved up on Nov 30 after government data showed a large weekly draw in crude supplies. On the New York Mercantile Exchange, WTI crude futures rose $2.35 (or 3%) to settle at $80.55 a barrel yesterday.

Before going into the overall macro environment for oil, let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the holiday-shortened week ending Nov 25.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 12.6 million barrels compared to expectations of a 4.4 million-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The combination of a surge in exports, lower imports and higher refinery demand accounted for the big stockpile draw with the world’s biggest oil consumer.

Total domestic stocks now stand at 419.1 million barrels — 3.2% less than the year-ago figure and 8% 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) fell 415,000 barrels to 24.3 million barrels.

Meanwhile, the crude supply cover decreased from 26.8 days in the previous week to 25.7 days. In the year-ago period, the supply cover was 27.9 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the third time in as many weeks. The 2.8 million-barrel rise was primarily attributable to higher production and a slight pullback in demand. Analysts had forecast that gasoline inventories would rise 600,000 barrels. At 213.8 million barrels, the current stock of the most widely used petroleum product is a marginal 0.7% less than the year-earlier level and 4% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) also increased for the third week in succession. The 3.5 million-barrel gain reflected higher production and a fall in demand. Meanwhile, the market looked for a supply build of some 800,000 barrels. Despite last week’s addition, current inventories — at 112.6 million barrels — are 9.1% below the year-ago level and 11% lower than the five-year average.

Refinery Rates: Refinery utilization, at 95.2%, rose 1.3% from the prior week.

Final Word

Even as fears revolving around high inflation and slowing growth somewhat cloud the outlook for Oil/Energy, it has remained the best S&P 500 sector this year. The space has generated a total return of more than 64% in 2022 against the S&P 500’s loss of around 14%. Apart from a positive fundamental picture, the sector is enjoying 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.

Oil has pulled back from those lofty levels, with the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC agreeing on a production curtailment means that the commodity has got enough reasons to stay elevated in the near-to-medium term.

Consequently, three of the top four gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum (OXY - Free Report) , Hess Corporation (HES - Free Report) and Marathon Petroleum (MPC - Free Report) .

Occidental Petroleum: OXY is the top-performing S&P 500 stock in 2022, with a gain of 139.7%. Occidental Petroleum beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 12.7%, on average.

OXY has a projected earnings growth rate of 283.1% for this year. Occidental Petroleum is valued at around $62.8 billion.

Hess Corporation: Hess shares have appreciated 94.4% so far in 2022. HES has a projected earnings growth rate of 229.7% for this year.

Hess, with a market capitalization of $43.8 billion, enjoys a Zacks Growth Style Score of A. HES beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 8.1%.

Marathon Petroleum: This stock is among the best performers on the S&P 500 Index, with shares having appreciated 90.4% in 2022. MPC, carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 949% for this year.

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

Marathon Petroleum beat the Zacks Consensus Estimate for earnings in each of the last four quarters. MPC has a trailing four-quarter earnings surprise of 60.1%, on average.

In-Depth Zacks Research for the Tickers Above

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