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Unexpected Dip in U.S. Crude Stocks

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged an unexpected decrease, as imports fell even though production climbed to its highest level since 1992. The report further revealed that within the ‘refined products’ category, gasoline stocks fell, while distillate supplies were up from the week-ago levels. Meanwhile, refiners scaled down their utilization rates by 0.5%.

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.

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.23 million barrels for the week ending Apr 12, 2013, following a climb of 250,000 barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Companies Inc. – had expected crude stocks to go up some 1.25 million barrels. A drop in the level of imports led to the surprise stockpile drawdown with the world's biggest oil consumer even as refiners reduced their utilization rates and domestic production continued to spike, now at their highest level since 1992.

However, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were up 1.08 million barrels from the previous week’s level to 51.15 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in January.

Despite the weekly inventory decrease, at 387.64 million barrels, current crude supplies are 5.0% above the year-earlier level, and comfortably exceed the upper limit of the average for this time of the year.

Gasoline: Supplies of gasoline were down for the ninth time in 10 weeks despite a decline in domestic consumption and rise in production. The fall in gasoline inventories could be attributed to lower imports.

The 633,000 barrels withdrawal – significantly below analysts’ projections for a 1.1 million-barrel decrease in supply level – took gasoline stockpiles down to 221.73 million barrels. Notwithstanding this drawdown, the existing inventory level of the most widely used petroleum product is 3.6% higher than the year-earlier level and is above the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 2.36 million barrels last week, contrary to analysts’ expectations for a 850,000 barrels drop in inventory level. The increase in distillate fuel stocks – the first in 5 weeks – could be attributed to weaker demand and higher imports, partially offset by lower production.

At 115.18 million barrels, distillate supplies are 10.7% below the year-ago level and are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.5% from the prior week to 86.3%. The analysts were expecting the refinery run rate to increase 0.5% to 87.6%.

Zacks Rank

A bullish data from the EIA generally acts as a positive catalyst for crude prices and buoy producers, such as Exxon Mobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) and ConocoPhillips (COP - Free Report) . With an improvement in the companies’ ability to generate positive earnings surprises, they can then move higher from their current Zacks Rank #3 (Hold).

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