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Crude Plunges with U.S. Supplies Up for 10th Straight Week

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The U.S. Energy Department's inventory release showed that crude stockpiles recorded another weekly build on rising imports and continued strength in production. Following the negative data set, the front month West Texas Intermediate (WTI) crude futures lost 2.5% (or $1.27) to $50.29 per barrel yesterday – the lowest settlement since October 2017.

The bearish oil market sentiment prompted selling in energy stocks, with the likes of Callon Petroleum Company (CPE - Free Report) , Laredo Petroleum, Inc. (LPI - Free Report) , Nabors Industries Ltd. (NBR - Free Report) and Superior Energy Services Inc. (SPN - Free Report) hitting fresh 52-week lows.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories jumped by 3.6 million barrels for the week ending Nov 23, following an increase of 4.9 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 down some 430,000 barrels.

Strong domestic production and sharp rise in imports led to the surprise stockpile build with the world's biggest oil consumer even as refinery run-rates rose. Output in the United States stayed strong at 11.7 million barrels per day – the most since the EIA started maintaining weekly data in 1983. Meanwhile, crude imports averaged 8.2 million barrels per day last week, up 608,000 barrels per day from the previous week.

Stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – soared 1.2 million barrels to 36.5 million barrels.

Following the tenth-straight weekly build, oil inventories in the United States are up almost 50 million barrels since September. The steady rise is on the verge of shifting the U.S. crude market from year-over-year storage deficit to a surplus. At 450.5 million barrels, current crude supplies are less than 1% below the year-ago figure and are 7% above the five-year average.

The crude supply cover was down from 27 days in the previous week to 26.8 days. In the year-ago period, the supply cover was 27.2 days.

Gasoline: Gasoline supplies fell for the third week in a row as demand edged up. The 764,000 barrels decline – contrary to the polled number of 141,000 barrels rise in supply level – took gasoline stockpiles down to 224.6 million barrels. Despite last week’s draw, the current stock of the most widely used petroleum product is still about 5% above the year-earlier level as well as the five-year range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 2.6 million barrels last week, while analysts were looking for an inventory draw of 315,000 barrels. The first weekly build in more than two months could be attributed to higher production and lower demand. But the recent string of drawdowns means that current supplies – at 121.8 million barrels – are 4.7% lower than the year-ago level and 6% below than the five-year average.

Refinery Rates: Refinery utilization was up by 2.9% from the prior week to 95.6%.

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?

Oil’s troubles have pushed the index into a bear market, leading to a more than 30% drop from recent highs. At this time, it might be prudent for investors to maintain caution — either withdraw for a while or look for fundamentally sound stocks.

If you are looking for a near-term energy play, Unit Corporation (UNT - Free Report) may be an excellent selection. This oilfield service provider has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The 2018 Zacks Consensus Estimate for this Tulsa, OK-based company is 96 cents, representing some 77.8% earnings per share growth over 2017. Next year’s average forecast is $1.39, pointing to another 45.1% growth.

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