The U.S. Energy Department's inventory release showed that crude stockpiles recorded a lower-than-expected weekly draw. On a further bearish note, the report revealed that refined product inventories – gasoline and distillate – both rose from their week earlier levels.
Following these bearish data sets, West Texas Intermediate (WTI) crude futures dived 3.7% (or $1.73) to $44.73 per barrel Wednesday – the lowest settlement since Nov 14. The commodity extended the losses by another 0.6% yesterday, finishing at $44.46 to a new 7-month low.
Investors Dump Energy Stocks
The federal data sparked widespread selling in energy stocks, which pushed the Energy Select Sector SPDR – an assortment of the largest U.S. energy companies – down almost 2% Wednesday.
The two energy representatives in the 30-stock Dow Jones industrial average, ExxonMobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) were down more than 1%. Meanwhile, some of the biggest casualties of the S&P 500 were Pioneer Natural Resources Co. (PXD - Free Report) , Concho Resources Inc. (CXO - Free Report) , Hess Corp. (HES - Free Report) and Cimarex Energy Co. (XEC - Free Report) .
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories decreased by 1.66 million barrels for the week ending June 9, 2017, following a jump of 3.30 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 refinery demand and lower imports led to the stockpile draw with the world's biggest oil consumer though the withdrawal failed to match up with expectations as domestic production edged higher.
Importantly, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 1.16 million barrels from previous week’s level to 62.22 million barrels.
While the ninth inventory reduction in 10 weeks will further help narrow the year-over-year storage surplus, the U.S. still remains awash with excess oil. At 511.55 million barrels, current crude supplies are up 2.1% from the year-ago period and are in the upper half of the average range during this time of the year.
The crude supply cover was down from 29.7 days in the previous week to 29.5 days. In the year-ago period, the supply cover was 32.6 days.
Gasoline: Supplies of gasoline were up for the second straight week on weakening demand. The 2.10 million barrels addition – contrary to the polled number of 600,000 barrels fall in supply level – took gasoline stockpiles up to 242.44 million barrels. Following last week’s increase, the existing stock of the most widely used petroleum product is now 2.3% higher than the year-earlier level and is above the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) inched up 328,000 barrels last week, ahead of analysts’ expectations for 200,000 barrels increase in supply level. The third successive weekly increase in distillate fuel stocks could be attributed to fall in exports. Despite past week’s increase in distillate fuel stocks, at 151.42 million barrels, supplies remain marginally lower than the year-ago level but are close to the upper limit of the average range for this time of the year.
Refinery Rates: Refinery utilization was up by 0.3% from the prior week to 94.4%.
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.
Stock to Buy
In case you are looking for energy names for your portfolio, one could opt for Canadian Natural Resources Ltd. (CNQ - 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.
Calgary, Alberta-based Canadian Natural Resources is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The 2017 Zacks Consensus Estimate for this company is $1.31, representing some 725% earnings per share growth over 2016. Next year’s average forecast is $2.52, pointing to another 92% growth.
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