Oil Prices Pushed Up by Supply Outages, Big Inventory Draw
U.S. oil prices rose yesterday as the market braced itself for potential supply disruptions from Hurricane Idalia, which hit the U.S. Gulf Coast. A coup in African crude producer Gabon that could tighten the fundamentals further supported the commodity. It was also aided by a weekly report from the Energy Information Administration ("EIA") showing a much bigger-than-expected decline in crude stockpiles.
On the New York Mercantile Exchange, WTI crude futures gained 47 vents (or 0.6%) to close at $81.63 a barrel yesterday.
With oil remaining above $80 per barrel — a healthy enough level for market participants —investors interested in the sector could benefit from having quality stocks like Black Stone Minerals BSM, CVR Energy CVI and Helix Energy Solutions Group HLX.
Let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the week ending Aug 25.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories fell 10.6 million barrels compared to expectations of a 5.2 million barrels decrease per the analysts surveyed by S&P Global Commodity Insights. The stockpile draw with the world’s biggest oil consumer was largely thanks to the dip in imports and increasing exports, in tandem with the strength in U.S. refinery runs that are hovering near the highest level in more than three and a half years. These factors more than offset the continued high domestic production, which, at 12.8 million barrels per day, was the highest since March 2020.
Total domestic stock now stands at 422.9 million barrels — 1.1% more than the year-ago figure but 3% lower 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) dropped 1.5 million barrels to 29.2 million barrels.
Meanwhile, the crude supply cover decreased from 26 days in the previous week to 25.4 days. In the year-ago period, the supply cover was 25.5 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies decreased for the third time in four weeks. The 214,000-barrel fall was primarily attributable to higher usage. Analysts had forecast that gasoline inventories would decline 600,000 barrels. At 217.4 million barrels, the current stock of the most widely used petroleum product is 1.4% more than the year-earlier level, while it is 5% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the third week in a row. The 1.2 million-barrel increase primarily reflected a pullback in demand. Meanwhile, the market looked for a supply drop of 1.4 million barrels. Following last week’s build, current inventories — at 117.9 million barrels — are 5.6% above the year-ago level but 15% lower than the five-year average.
Refinery Rates: Refinery utilization, at 93.3%, dropped 1.2% from the prior week.
3 Energy Stocks to Buy
Having gone through the Weekly Petroleum Status Report, investors interested in the energy space might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Black Stone Minerals: BSM beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters, met in one and missed in the other, with an average of 20.9%.
BSM is valued at around $3.9 million. Black Stone Minerals has seen its units move up 9% in a year.
CVR Energy: CVI beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 30 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 32.8%.
CVR Energy is valued at around $3.3 billion. CVI has seen its shares edge up 0.5% in a year.
Helix Energy Solutions Group: Over the past 30 days, Helix Energy Solutions Group saw the Zacks Consensus Estimate for 2023 move up 4.3%. The 2023 Zacks Consensus Estimate HLX indicates 42.1% year-over-year revenue growth.
Helix Energy Solutions Group is valued at around $1.5 billion. HLX has seen its shares surge 135.9% in a year.
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