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U.S. Crude Stocks Drop by 12.6M Barrels to Lowest Since 2015

Nilanjan Choudhury
Steep decline in imports, partly due to an outage at Syncrude facility in Canada, led to the massive stockpile draw with the world's biggest oil consumer.

The U.S. Energy Department's inventory release showed that crude stockpiles recorded its largest weekly draw since 2016. The massive 12.6 million barrels dip pushed storage levels to their lowest since February 2015, while keeping them under the five-year average. 

Despite the record decline, U.S. benchmark crude futures lost as much as 5% (or $3.73) to $70.38 per barrel Wednesday – the worst daily slump in 13 months. The front month West Texas Intermediate (WTI) futures further edged down to $70.33 at yesterday’s close.

The price plunge could be attributed to fears of supply resumption from Libya and escalating trade conflict between the United States and China.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 12.6 million barrels for the week ending Jul 6, following a shock increase of 1.2 million 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 4.8 million barrels.

Steep decline in imports, partly due to an outage at Syncrude facility in Canada, led to the massive stockpile draw with the world's biggest oil consumer even as domestic production remains at 10.9 million barrels per day – the most since the EIA started maintaining weekly data in 1983.

Oil inventories have generally trended lower in a year and a half. In fact, stockpiles have shrunk in 45 of the last 66 weeks and are down more than 90 million barrels in the past year. The gradual fall has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 405.2 million barrels, current crude supplies are 18% below the year-ago figure and 4% under the five-year average.

Moreover, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – plunged 2.1 million barrels to 25.7 million barrels.

The crude supply cover was down from 23.7 days in the previous week to 22.90 days. In the year-ago period, the supply cover was 29.0 days.

Gasoline: Gasoline supplies were down for the second week. The 694,000 barrels draw – below the polled number of one million barrels fall in supply level – took gasoline stockpiles down to 239 million barrels. Following last week’s decline, the stock of the most widely used petroleum product is now 1.4% above the year-earlier level and is 6% over the five-year range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went up 4.1 million barrels last week, ahead of analysts’ expectations for 1.7 million barrels increase in supply level. The fourth successive weekly rise could be attributed to lower demand. At 121.7 million barrels, current supplies are 21% below the year-ago level and 12% lower than the five-year average.

Refinery Rates: Refinery utilization was down by 0.4% from the prior week to 96.7%.

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.

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Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
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ConocoPhillips (COP) : Free Stock Analysis Report
 
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