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Crude Supplies Surge, as Imports Jump

Zacks Equity Research

The U.S. Energy Department's weekly inventory release showed that crude stockpiles went up, as imports jumped and refiners scaled down their utilization rates. The report further revealed that within the ‘refined products’ category, gasoline stocks rose, while distillate supplies were down from the week-ago level.

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 jumped by 2.52 million barrels for the week ending Jun 07, 2013, following a decrease of 6.27 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. (MHFI) – had expected crude stocks to remain unchanged. A sharp uptick in the level of imports and drop in refinery utilization rates led to the stockpile build-up with the world's biggest oil consumer.

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 down 759,000 barrels from the previous week’s level to 49.27 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in Jan.

Following the weekly inventory increase, at 393.81 million barrels, current crude supplies are 2.4% above the year-earlier level, and exceeds the upper limit of the average for this time of the year. The crude supply cover was up marginally from 25.7 days in the previous week to 25.8 days. In the year-ago period, the supply cover was 25.1 days.

Gasoline: Supplies of gasoline were up for the first time in 3 many weeks, as domestic consumption weakened and imports spiked. This was partially offset by lower production.

The 2.75 million barrels gain – significantly ahead of analysts’ projections for a 1 million-barrels increase in supply level – took gasoline stockpiles up to 221.55 million barrels. Following this build, the existing inventory level of the most widely used petroleum product is 9.8% 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 down 1.16 million barrels last week, contrary to analysts’ expectations for a 1.4 million barrels build in inventory level. The decrease in distillate fuel stocks – the first in 3 weeks – could be attributed to stronger demand, lower imports and decline in production.

At 122.11 million barrels, distillate supplies are 1.8% above the year-ago level but are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.9% from the prior week to 87.5%.

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), Chevron Corp. (CVX) and ConocoPhillips (COP). 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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Read the Full Research Report on XOM

Read the Full Research Report on MHFI

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