The U.S. Energy Department's inventory release showed that crude stockpiles recorded an unexpected build. Worryingly, supplies at the Cushing, OK storage hub rose, too. On a further bearish note, the report revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels.
However, the downbeat sentiment on the back of increase in stocks across the board was mostly offset by subsequent reports suggesting Russia’s willingness to back OPEC oil cartel’s decision to curb production. As a result, West Texas Intermediate (WTI) crude futures fell by a miniscule 0.5% (or 25 cents) to $45.57 per barrel Wednesday.
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 5.27 million barrels for the week ending Nov 11, 2016, following a rise of 2.43 million barrels in the previous week.
The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go down some 2 million barrels. An uptick in imports led to the surprise stockpile build with the world's biggest oil consumer even as refinery activity jumped.
Moreover, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was up 691,000 barrels from previous week’s level to 59.17 million barrels.
Following the third straight inventory rise, U.S. remains awash with excess oil, though the year-over-year storage surplus has narrowed down considerably in recent months following a run of drawdowns.
At 490.28 million barrels, current crude supplies are up 8% from the year-ago period and are above the upper limit of the average range for this time of year.
The crude supply cover – at 31.2 days – remained flat from previous week. In the year-ago period, the supply cover was 30.8 days.
Gasoline: Supplies of gasoline were up for the first time in 4 weeks on rising imports, partly offset by strengthening demand and lower production. The 746,000 barrels build – contrary to the analysts’ polled number of 400,000 barrels decrease in supply level – took gasoline stockpiles up to 221.71 million barrels. Following last week’s increase, the existing stock of the most widely used petroleum product is 3% higher than the year-earlier level and is well above the upper half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) edged up by 310,000 barrels last week, again contradicting analysts’ expectations for a 2.2-million-barrel decline. The increase in distillate fuel stocks – after having fallen for seven straight weeks – could be attributed to a rise in imports and production, assisted by lower demand. At 148.91 million barrels, distillate supplies are 6% higher than the year-ago level and are sitting comfortably over the upper half of the average range for this time of the year.
Refinery Rates: Refinery utilization was up by 2.1% from the prior week to 89.2%.
About the Weekly Petroleum Status Report
The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.
The data from EIA generally acts as a catalyst for crude prices and affect producers, such as ExxonMobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) and ConocoPhillips (COP - Free Report) , and refiners such as Valero Energy Corp. (VLO - Free Report) , Phillips 66 (PSX - Free Report) and HollyFrontier Corp. (HFC - Free Report) .
However, each of these firms has a Zacks Rank #3 (Hold), which does not make them screaming buys. In case you are looking for energy names for your portfolio, one could opt for Diamondback Energy Inc. (FANG - Free Report) . It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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