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U.S. Crude Ends Lower Even as EIA Reveals Drop in Supplies

Nilanjan Choudhury

Oil finished lower on Wednesday even as a U.S. government report revealed a weekly decrease in domestic crude supplies that was much larger than anticipated. While EIA reported the first inventory decline in three weeks, crude prices edged down 14 cents (or 0.3%) to $53.76 a barrel, on concerns over signs of worsening oil demand growth as the U.S.-China trade spat continues to threaten a major slowdown in global economy.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 3.1 million barrels for the week ending Jun 14, after rising to a nearly 2-year high in the previous week. The analysts had expected crude stocks to go down some 2 million barrels. Lower imports, an uptick in exports and improving refiner demand led to the larger-than-expected stockpile draw with the world's biggest oil consumer.

Crude exports averaged 3.4 million barrels per day last week, up 300,000 barrels per day from the previous week. Meanwhile, net imports edged down 144,000 barrels per day and crude demand rose 200,000 barrels per day.

Despite past week’s decline, oil inventories have generally trended higher since mid-March. In fact, stockpiles have expanded in nine of the last 13 weeks and are up nearly 43 million barrels (or 10%) during the period.

The latest report also shows that stocks at the Cushing terminal in Oklahoma rose to their highest since December 2017. Inventories at the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange was up 642,000 barrels to 53.6 million barrels.

At 482.4 million barrels, current crude supplies are 13.1% above the year-ago figure and 7% over the five-year average. The crude supply cover was down from 28.8 days in the previous week to 28.4 days. In the year-ago period, the supply cover was 24.5 days.

Gasoline: Gasoline supplies fell 1.7 million barrels for its first weekly decline in five weeks. The drop – contrary to the polled number of 1 million barrels addition – came on account of record demand for the fuel, which reached 9.9 million barrels per day. At 233.2 million barrels, the stock of the most widely used petroleum product is now 2.8% below the year-earlier level though it remains 1% above the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell 551,000 barrels last week, while analysts were looking for an inventory build of around 1 million barrels. Current supplies – at 127.8 million barrels – are 9% higher than the year-ago level though stocks remain 5% below than the five-year average.

Refinery Rates: Refinery utilization was up by 0.7% from the prior week to 93.9%.

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?

In case you are looking for a near-term energy play, Hess Corporation HES might be a good selection. The Bakken-focused oil producer has a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The 2019 Zacks Consensus Estimate for this New York-based company is 21 cents, representing some 128.4% earnings per share growth over 2018. Next year’s average forecast is $1.86 pointing to another 787.5% growth.

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