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Oil Rises After EIA Reports Bullish Surprise on All Fronts

Nilanjan Choudhury

Oil prices rose back above $55 a barrel, after U.S. government data showed a crude stockpile draw twice above expectations. The decline in oil inventories was the largest in the U.S. in five weeks, and came in tandem with a fall in gasoline and distillate supplies.

It remains to be seen whether the positive report changes the narrative of the oil market that was in bear territory just weeks ago amid fears of a global economic slowdown in the backdrop of the U.S.-China trade war.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 10 million barrels for the week ending Aug 23, compared to the 4.7 million barrels drawdown that energy analysts had expected. A combination of lower imports and higher exports largely drove the massive stockpile decline with the world's biggest oil consumer. This puts the total domestic stocks at 427.8 million barrels – 5.4% above the year-ago figure and in line with the five-year average.

Oil prices drew further 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 million barrels to 40.4 million barrels – the lowest since December.   

The crude supply cover was down from 25.1 days in the previous week to 24.4 days. In the year-ago period, the supply cover was 22.9 days.

Turning to products, and it is a fairly bullish story.

Gasoline: Gasoline supplies fell 2.1 million barrels as demand for the fuel increased by 274,000 barrels per day to 9.9 million barrels per day. Analysts had forecast 530,000 barrels decline. At 232 million barrels, the current stock of the most widely used petroleum product is unchanged from the year-earlier level but exceeds the five-year average range by 3%.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 2.1 million barrels last week on lower production and higher demand, while analysts were looking for an inventory addition of 700,000 barrels. Current supplies – at 136.1 million barrels – are 4.7% higher than the year-ago level though stocks remain 4% below than the five-year average.

Refinery Rates: Refinery utilization was down 0.7% from the prior week to 95.2%.

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 – all carrying Zacks Rank #3 (Hold) – and refiners such as Valero Energy VLO, Phillips 66 PSX and Marathon Petroleum MPC.

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Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
 
Phillips 66 (PSX) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
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