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Here's What the EIA's Latest Crude Inventory Report Revealed

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U.S. crude and gasoline stocks fell last week, while distillate inventories rose, data from the Energy Information Administration ("EIA") showed on Wednesday. Oil supplies at the Cushing, Oklahoma, delivery hub fell too. The bullish data points notwithstanding, U.S. oil prices ended lower Wednesday as the market’s focus remains firmly fixed on the demand side of the equation.

While the U.S. Energy Department's latest inventory release revealed the first decline in domestic crude supplies in 16 weeks, it wasn’t enough to ease investor worries of a supply glut. In total, U.S. commercial stockpiles rose by more than 75 million barrels since the week ending Mar 20. Further, domestic fuel demand remains abysmally weak as the coronavirus-induced lockdown keeps motorists off road and planes grounded. Meanwhile, refinery utilization in the United States is close to its lowest level ever, while the Cushing oil storage tanks are already more than 80% full. As a proof of the demand destruction, EIA estimates U.S. oil consumption in 2020 is expected to plunge by 2.2 million barrels per day to 18.29 million barrels per day.

This implies that oil prices are unlikely to trade much higher from current levels of around $25. It's been a catastrophic year so far for crude oil, with the American benchmark WTI suffering a dramatic collapse. Even the likes of ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and BP plc (BP - Free Report) are struggling to contend with these low commodity prices with their dividend paying business models under severe pressure. But some ‘Big Oil’ companies like Equinor (EQNR - Free Report) and Royal Dutch Shell (RDS.A - Free Report) — both carrying a Zacks Rank #3 (Hold) — had to slash their dividend payouts in a bid to preserve liquidity.

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Now, let’s turn our attention to the latest figures from the EIA.

Analyzing the Latest EIA Report

Below we review the EIA's Weekly Petroleum Status Report for the week ending May 8.

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 745,000 barrels, versus expectations for a 4.8 million barrels increase. A drop in domestic production and record low imports accounted the small stockpile decrease with the world's biggest oil consumer. This puts total domestic stocks at 531.5 million barrels – still 12.6% above the year-ago figure and 11% over the five-year average. Despite the unexpected drawdown, oil inventories are now close to their peak of 535.5 million barrels achieved in March 2017.  

The latest report also showed that supplies at the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) was down 3 million barrels to 62.4 million barrels.

The crude supply cover was up from 41.9 days in the previous week to 42 days. In the year-ago period, the supply cover was 28.6 days.

Let’s turn to products now.

Gasoline: Gasoline supplies tallied a decrease for the third week in a row. The fuel’s 3.5 million barrels decline is attributable to dwindling refinery crude runs in response to the drying up of demand from the coronavirus-induced economic shutdown. Analysts had forecast 2.5 million barrels fall. At 252.9 million barrels, the current stock of the most widely used petroleum product is 12.4% higher than the year-earlier level and is 9% above the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) jumped for a sixth straight week. The 3.5 million barrels increase was driven by plunging imports and lower production. Meanwhile, the market had been looking for a supply build of 4.1 million barrels. Current supplies — at 155 million barrels — are 23.4% higher than the year-ago level and 16% above the five-year average.

Refinery Rates: Refinery utilization was down 2.6% from the prior week to 67.9%, and within touching distance of record lows. Downstream operators including Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) , HollyFrontier have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus. As a matter of fact, U.S. oil input to refineries has fallen in five of the past seven weeks, with the latest period reflecting a 593,000 barrels drop to 12.4 million barrels per day.  

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