Reflecting the resumption of activities post hurricane Harvey, the U.S. Energy Department's inventory release showed that crude stockpiles recorded another large build, while product inventories (gasoline and distillate) fell sharply. In fact, market players welcomed the faster-than-normal return to normalized operations in South Texas region following the storm’s landfall nearly a month ago.
The commodity was also supported by tensions in the Middle East over President Donald Trump's comments on Iran's nuclear deal and talks of an extension to the output cut agreement between OPEC and non-OPEC producers beyond March next year.
Eventually, West Texas Intermediate (WTI) crude futures gained 1.9% (or 93 cents) to settle at $50.41 per barrel Thursday – the highest level since May 24.
Energy Stocks Gain
The bullish data sets encouraged buying in energy stocks, which lifted the Energy Select Sector SPDR – an assortment of the largest U.S. energy companies – almost 0.7% Wednesday. Some of the biggest gainers of the S&P 500 yesterday were oil and oil-related companies like Diamond Offshore Drilling Inc. (DO - Free Report) , Chesapeake Energy Corp. (CHK - Free Report) , Marathon Oil Corp. (MRO - Free Report) , Devon Energy Corp. (DVN - Free Report) , Apache Corp. (APA - Free Report) and Newfield Exploration Company (NFX - Free Report) .
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories jumped by 4.6 million barrels for the week ending Sep 15, following an increase of 5.9 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 up some 2.4 million barrels.
Volume ramp-up from the import and production facilities shuttered in the wake of hurricane Harvey led to the big stockpile build with the world's biggest oil consumer.
Despite the substantial climb in oil storage for a third straight week, current supplies – at 472.8 million barrels – are still marginally below the year-ago period. However, stocks are in the upper half of the average range during this time of the year.
Meanwhile, 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 by 703,000 barrels to 59.8 million barrels.
The crude supply cover was up from 29.4 days in the previous week to 30.8 days. In the year-ago period, the supply cover was 30.2 days.
Gasoline: Supplies of gasoline were down for the third week running as Gulf Coast refineries sidelined by Harvey continue to ramp up throughput. The 2.1 million barrels draw – above the polled number of 800,000 barrels fall in supply level – took gasoline stockpiles down to 216.2 million barrels. Following last week’s slide, the existing stock of the most widely used petroleum product is now 4% below the year-earlier level but is in the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 5.7 million barrels last week, compared with analysts’ expectations for one million barrels decrease in supply level. The largest weekly fall since 2011 could be again be attributed to recovering refinery post storm-induced outages. At 138.9 million barrels, current supplies are 15.8% below the year-ago level but are in the bottom half of the average range for this time of the year.
Refinery Rates: Refinery utilization was up by 5.5% from the prior week to 83.2%. While refinery runs rebounded from the previous week’s nine-year lows, it’s still a far cry from the pre-Harvey rates of 96.6% - the highest since 2005. With more units returning to activity over the coming weeks, we expect utilization and throughput to continue to rise.
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.
Want to Own an Energy Stock Now?
If you are looking for a near-term energy play, Lonestar Resources US Inc. (LONE - Free Report) may be a good selection. This company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Fort Worth, TX, Lonestar is oil and gas exploration and production company with primary focus on the Eagle Ford Shale in South Texas. The 2017 Zacks Consensus Estimate for this company is a loss of 62 cents, some 79.7% narrower than 2016. Next year’s average forecast is a loss of 34 cents, pointing to another 45.2% improvement on the back of accretive acquisitions and attractive well economics.
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