Back to top

Image: Bigstock

Oil Prices Ignore Surprise Supply Build to Reclaim $70 Level

Read MoreHide Full Article

U.S. oil prices rallied Thursday to settle back above $70 despite government data revealing an unexpected weekly build in crude to go with the rise in distillate supplies. On the New York Mercantile Exchange, WTI crude futures gained $2.01 (or 3%) to close at $70.10 a barrel yesterday.

The key reasons for oil’s bounce were the progress toward the U.S. debt-ceiling resolution and the possibility of another supply cut in the upcoming meeting of oil producers alliance OPEC+.

Some oil-related stocks that could benefit in the current environment include NOW Inc. (DNOW - Free Report) , Murphy USA (MUSA - Free Report) and Dril-Quip, Inc. (DRQ - Free Report) .

Let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the week ending May 26.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 4.5 million barrels compared to expectations of a 3.4 million barrel decrease per the analysts surveyed by S&P Global Commodity Insights. A surge in imports primarily accounted for the surprise stockpile build with the world’s biggest oil consumer even as refinery demand ticked up.

Total domestic stock now stands at 459.7 million barrels — 10.9% more than the year-ago figure but 2% 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 1.6 million barrels to 38.9 million barrels.

Meanwhile, the crude supply cover, at 28.7 days, remained unchanged from the previous week. In the year-ago period, the supply cover was 25.9 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the fourth time in as many weeks. The 207,000-barrel fall was attributable to lower production. Analysts had forecast that gasoline inventories would drop 500,000 barrels. At 216.1 million barrels, the current stock of the most widely used petroleum product is 1.3% less than the year-earlier level, while it is 8% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for just the third time in the past 12 weeks. The 985,000-barrel increase reflected lower usage. Meanwhile, the market looked for a supply decline of 280,000 barrels. Following last week’s build, current inventories — at 106.7 million barrels — are 0.3% above the year-ago level but 18% lower than the five-year average.

Refinery Rates: Refinery utilization, at 93.1%, moved up 1.4% from the prior week.

3 Energy Stocks to Buy

Investors interested in the energy space might look at operators like NOW Inc., Murphy USA and Dril-Quip, each carrying a Zacks Rank #2 (Buy) currently.

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

NOW Inc.: DNOW beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. NOW has a trailing four-quarter earnings surprise of 32.1%, on average.

DNOW is valued at around $951 million. NOW has seen its shares lose 19.6% in a year.

Murphy USA: It is valued at some $6 billion. The Zacks Consensus Estimate for MUSA’s 2023 earnings has been revised 5.1% upward over the past 30 days.

Murphy USA, headquartered in El Dorado, AR, beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. MUSA shares have gained 13.2% in a year.

Dril-Quip: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. DRQ has a trailing four-quarter earnings surprise of 119.8%, on average.

Dril-Quip is valued at around $763.8 million. DRQ has seen its shares fall 23.6% in a year.

See More Zacks Research for These Tickers

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

Dril-Quip, Inc. (DRQ) - free report >>

Murphy USA Inc. (MUSA) - free report >>

NOW Inc. (DNOW) - free report >>

Published in