The U.S. Energy Department's inventory release showed that crude stockpiles remained essentially unchanged last week, while product inventories (gasoline and distillate) rose sharply. Amid these conflicting signals, the commodity was propped up by bullish jobs data and optimism surrounding talks between the United States and China to resolve the trade war. Both these developments eased fears of a possible economic slowdown.
As a result, the front month West Texas Intermediate crude futures gained 1.9% (or 87 cents) to settle at $47.96 per barrel on Friday.
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by just 7,000 barrels for the week ending Dec 28, following a decrease of 46,000 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 1.3 million barrels.
A drop in crude imports and stronger demand were offset by record domestic production. As a result, the stockpile with the world's biggest oil consumer was virtually unchanged week-on-week.
While the recent weekly increase was miniscule, oil inventories have generally trended higher over the past few months. As a proof, stockpiles are up around 40 million barrels since September. Consequently, the U.S. crude market has shifted from year-over-year storage deficit to a surplus. At 441.4 million barrels, current crude supplies are 4% above the year-ago figure and 8% over the five-year average.
Moreover, the latest report shows that stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – rose 641,000 barrels to 41.9 million barrels.
The crude supply cover was down from 25.3 days in the previous week to 25.2 days. In the year-ago period, the supply cover was 24.6 days.
Gasoline: Gasoline supplies tallied a fifth straight week of gains as demand weakened. The 6.9 million barrels gain – significantly above the polled number of 1.6 million barrels rise in supply level – took gasoline stockpiles up to 240 million barrels. Following last week’s build, the current stock of the most widely used petroleum product is about 2.9% above the year-earlier level and 5% over the five-year range.
Distillate: Distillate fuel supplies (including diesel and heating oil) climbed 9.5 million barrels last week, while analysts were looking for an inventory build of just 1.6 million barrels. The hefty increase could be attributed to softening demand. Despite the big build, current supplies – at 129.4 million barrels – still remain 6.8% lower than the year-ago level and 7% below than the five-year average.
Refinery Rates: Refinery utilization edged up 2.1% from the prior week to 97.2%.
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.
The data from EIA generally acts as a catalyst for crude prices and affect producers, such as ExxonMobil XOM, Chevron CVX and ConocoPhillips COP, and refiners such as Valero Energy VLO, Phillips 66 PSX and Marathon Petroleum MPC.
Want to Own an Energy Stock Now?
Oil’s troubles have pushed the index into a bear market, leading to a more than 35% 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 Corp. UNT might be a good selection. Unit 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 Unit is 98 cents, representing some 81.5% earnings per share growth over 2017. This year’s average forecast is $1.81, pointing to another 84.7% growth.
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