We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Oil Prices Keep Rising When Supplies Are at Record Highs?
Read MoreHide Full Article
U.S. oil prices rose on Wednesday, touching a fresh three-month high as the market focused on the Fed’s dovish outlook and a falling dollar, shrugging off a surprisingly large addition to crude stockpiles that took it to record levels.
In particular, the commodity got a boost from U.S. Federal Reserve Chairman Jerome Powell’s pledge to maintain interest rates at near-zero levels through 2022 to support the world’s largest economy. While easing concerns about energy demand, this also put downward pressure on the dollar, which, again, was positive for oil. A weaker greenback usually makes oil more attractive as it is denominated in dollars.
On the New York Mercantile Exchange, July WTI crude gained 66 cents, or 1.7%, to settle at $39.60 a barrel, the highest settlement since Mar 6.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jun 5.
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 5.7 million barrels, versus expectations for a 3.2 million barrels increase. A big jump in imports from Saudi Arabia and drop in exports to a seven-month low accounted for the surprise stockpile increase with the world's biggest oil consumer. This puts total domestic stocks at 538.1 million barrels – the highest on record, 10.8% above the year-ago figure and 14% over the five-year average.
Meanwhile, oil prices drew some support from stockpile draw at the Cushing terminal in Oklahoma. The key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange saw inventories decline 2.3 million barrels to 49.4 million barrels.
The crude supply cover was down from 41.3 days in the previous week to 40.9 days. In the year-ago period, the supply cover was 28.8 days.
Let’s turn to products now.
Gasoline: Gasoline supplies tallied an increase for the third time in four weeks. The fuel’s 866,000 barrels build is attributable to higher production even as demand continues to recover from the unprecedented rout associated with coronavirus. Analysts had forecast 300,000 barrels rise. At 258.7 million barrels, the current stock of the most widely used petroleum product is 10.1% higher than the year-earlier level and is 11% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) jumped for a tenth straight week. The 1.6 million barrels increase reflected rising production and imports, which more than offset demand gains. Meanwhile, the market had been looking for a supply build of 1.5 million barrels. Current supplies — at 175.8 million barrels — are at their highest since 2010, 36.9% over the year-ago level and 29% above the five-year average.
Refinery Rates: Refinery utilization was up 1.3% from the prior week to 73.1%.
Conclusion
The crude inventory rise surprised the market, which was expecting a decline based on easing lockdown measures. Supplies are now at their highest weekly level on record, topping the former all time high of 535.5 million barrels for the week ended Mar 31, 2017.
On a slightly positive note, oil at the storage hub in Cushing continued to fall. The report was also supportive in terms of U.S. producers scaling back operations. Weekly figures show output has dropped to 11.1 million barrels per day, since reaching 13.1 million in the second week of March.
In particular, volumes from United States’ number one basin – Permian - is set to fall by 87,000 bbl/d month over month to 4.3 MMbbl/d in June – the second month of decline, as the likes of Diamondback Energy (FANG - Free Report) , Cimarex Energy , Concho Resources , Pioneer Natural Resources (PXD - Free Report) and others invest a lot less money into the unconventional play in 2020.
The pockets of bullish data in the report notwithstanding, investors still remain worried of the supply glut. In total, U.S. commercial stockpiles are up by more than 19% since March, while domestic fuel demand, though improving, remains weak. As it is, another build in gasoline and distillate inventories in the latest report kept traders worried.
Again, despite another rise in refinery runs, utilization in the United States is not too far from its lowest level ever. Downstream operators including Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) , Phillips 66 (PSX - Free Report) – all carrying a Zacks Rank #3 (Hold) - have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus.
As a proof of the demand destruction, EIA estimates U.S. oil consumption in 2020 to plunge by 2.4 million barrels per day to 18.06 million barrels per day.
While the OPEC+ production cut extension most likely managed to put a floor under prices, serious questions remain about the future direction of oil.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Shutterstock
Why Oil Prices Keep Rising When Supplies Are at Record Highs?
U.S. oil prices rose on Wednesday, touching a fresh three-month high as the market focused on the Fed’s dovish outlook and a falling dollar, shrugging off a surprisingly large addition to crude stockpiles that took it to record levels.
In particular, the commodity got a boost from U.S. Federal Reserve Chairman Jerome Powell’s pledge to maintain interest rates at near-zero levels through 2022 to support the world’s largest economy. While easing concerns about energy demand, this also put downward pressure on the dollar, which, again, was positive for oil. A weaker greenback usually makes oil more attractive as it is denominated in dollars.
On the New York Mercantile Exchange, July WTI crude gained 66 cents, or 1.7%, to settle at $39.60 a barrel, the highest settlement since Mar 6.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jun 5.
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 5.7 million barrels, versus expectations for a 3.2 million barrels increase. A big jump in imports from Saudi Arabia and drop in exports to a seven-month low accounted for the surprise stockpile increase with the world's biggest oil consumer. This puts total domestic stocks at 538.1 million barrels – the highest on record, 10.8% above the year-ago figure and 14% over the five-year average.
Meanwhile, oil prices drew some support from stockpile draw at the Cushing terminal in Oklahoma. The key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange saw inventories decline 2.3 million barrels to 49.4 million barrels.
The crude supply cover was down from 41.3 days in the previous week to 40.9 days. In the year-ago period, the supply cover was 28.8 days.
Let’s turn to products now.
Gasoline: Gasoline supplies tallied an increase for the third time in four weeks. The fuel’s 866,000 barrels build is attributable to higher production even as demand continues to recover from the unprecedented rout associated with coronavirus. Analysts had forecast 300,000 barrels rise. At 258.7 million barrels, the current stock of the most widely used petroleum product is 10.1% higher than the year-earlier level and is 11% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) jumped for a tenth straight week. The 1.6 million barrels increase reflected rising production and imports, which more than offset demand gains. Meanwhile, the market had been looking for a supply build of 1.5 million barrels. Current supplies — at 175.8 million barrels — are at their highest since 2010, 36.9% over the year-ago level and 29% above the five-year average.
Refinery Rates: Refinery utilization was up 1.3% from the prior week to 73.1%.
Conclusion
The crude inventory rise surprised the market, which was expecting a decline based on easing lockdown measures. Supplies are now at their highest weekly level on record, topping the former all time high of 535.5 million barrels for the week ended Mar 31, 2017.
On a slightly positive note, oil at the storage hub in Cushing continued to fall. The report was also supportive in terms of U.S. producers scaling back operations. Weekly figures show output has dropped to 11.1 million barrels per day, since reaching 13.1 million in the second week of March.
In particular, volumes from United States’ number one basin – Permian - is set to fall by 87,000 bbl/d month over month to 4.3 MMbbl/d in June – the second month of decline, as the likes of Diamondback Energy (FANG - Free Report) , Cimarex Energy , Concho Resources , Pioneer Natural Resources (PXD - Free Report) and others invest a lot less money into the unconventional play in 2020.
The pockets of bullish data in the report notwithstanding, investors still remain worried of the supply glut. In total, U.S. commercial stockpiles are up by more than 19% since March, while domestic fuel demand, though improving, remains weak. As it is, another build in gasoline and distillate inventories in the latest report kept traders worried.
Again, despite another rise in refinery runs, utilization in the United States is not too far from its lowest level ever. Downstream operators including Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) , Phillips 66 (PSX - Free Report) – all carrying a Zacks Rank #3 (Hold) - have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
As a proof of the demand destruction, EIA estimates U.S. oil consumption in 2020 to plunge by 2.4 million barrels per day to 18.06 million barrels per day.
While the OPEC+ production cut extension most likely managed to put a floor under prices, serious questions remain about the future direction of oil.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>