Oil Hits Speed Bump on Inventory Build but Stays Above $80
U.S. oil prices edged down on Wednesday after a weekly report from the Energy Information Administration ("EIA") showed an unexpected increase in crude and gasoline supplies. On the New York Mercantile Exchange, WTI crude futures lost 27 cents (or 0.3%) to close at $81.35 a barrel yesterday. Despite the blip, the commodity appears quite stable on the back of relatively bullish fundamentals and tensions in the oil-rich Middle East.
We believe that oil’s current levels of just above $80 allow long-term-oriented market participants to buy shares in quality companies at attractive prices. Investors interested in the sector could benefit from having top-ranked stocks like Murphy USA MUSA, Sunoco LP SUN and Helmerich & Payne HP in their portfolios.
Let's dig deep into EIA’s Weekly Petroleum Status Report for the week ending Mar 22.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories rose 3.2 million barrels compared to analysts’ expectations of a 2-million-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The surprise stockpile build with the world’s biggest oil consumer was largely thanks to higher imports, lower export shipments and continued high domestic production. These factors more than offset the rise in refinery demand.
Total domestic stock now stands at 448.2 million barrels, 5.4% lower than the year-ago figure of 473.7 million barrels and 2% less than the five-year average.
The latest report also showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) rose 2.1 million barrels to 33.5 million barrels.
Meanwhile, the crude supply cover dropped from 29 days in the previous week to 28.6 days. In the year-ago period, the supply cover was 30.9 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies increased for the first time in eight weeks. The 1.3-million-barrel build was primarily attributable to a pullback in demand and exports. Analysts had forecast that gasoline inventories would drop 1.7 million barrels. At 232.1 million barrels, the current stock of the most widely used petroleum product is 2.4% more than the year-earlier level, while it is 1% lower than the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) fell after a two-week climb. The 1.2-million-barrel drop mainly reflected an uptick in demand. Meanwhile, the market looked for a supply draw of 300,000 barrels. Despite last week’s decrease, current inventories — at 117.3 million barrels — are 0.5% above the year-ago level but 6% lower than the five-year average.
Refinery Rates: Refinery utilization, at 88.7%, rose 0.9% from the prior week.
3 Energy Stocks to Buy
Having gone through the Weekly Petroleum Status Report, investors interested in the energy sector might consider operators like Murphy USA, Sunoco LP and Helmerich & Payne. MUSA and SUN have a Zacks Rank #1 (Strong Buy) each, while HP carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA: It beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. It has a trailing four-quarter earnings surprise of 13.6%, on average.
Murphy USA is valued at around $8.6 billion. The company has seen its shares surge 66.2% in a year.
Sunoco LP: The 2024 Zacks Consensus Estimate for SUN indicates 35.9% year-over-year earnings per unit growth.
Sunoco is valued at around $6.1 billion. SUN has seen its units rise 38.7% in a year.
Helmerich & Payne: Over the past 60 days, Helmerich & Payne saw the Zacks Consensus Estimate for fiscal 2024 move up 6.7%. HP beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, delivering an average surprise of 20.2%.
Helmerich & Payne is valued at around $4.1 billion. HP’s shares have gained 14.8% in a year.
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