The U.S. Energy Department's weekly inventory release showed
that crude stockpiles fell sharply for the second time in as many
weeks amid climbing refinery runs. The report further revealed
that within the 'refined products' category, gasoline stocks
fell, while distillate supplies were up from the week-ago level.
The bullish data from the U.S. government, together with the
ongoing unrest in Egypt that could destabilize the resource-rich
Middle East and further tighten the global supply picture, has
kept the commodity above $100 a barrel since last week. However,
indications of a slowdown from China - the world's second largest
economy - may play spoilsport and pull back oil prices.
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
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.
Analysis of the Data
The federal government's EIA report revealed that crude
inventories fell by 9.87 million barrels for the week ending Jul
05, 2013, following a decrease of 10.35 million barrels in the
The analysts surveyed by Platts - the energy information arm of
McGraw-Hill Financial Inc.
) - had expected crude stocks to go down some 3.8 million
barrels. An uptick in refinery processing rates - to their
highest level since 2007 - led to the massive stockpile drawdown
with the world's biggest oil consumer even as imports and
In particular, crude inventories at the Cushing terminal in
Oklahoma - the key delivery hub for U.S. crude futures traded on
the New York Mercantile Exchange - were down 2.69 million barrels
from the previous week's level to 46.97 million barrels. Stocks
are currently 9.5% under the all-time high of 51.86 million
barrels reached in Jan.
As a result of the second successive weekly inventory plunge, at
373.92 million barrels, current crude supplies have gone 1.1%
below the year-earlier level, though it is still close to the
upper limit of the average for this time of the year. The crude
supply cover was down from 24.5 days in the previous week to 23.6
days. In the year-ago period, the supply cover was 24.1 days.
Supplies of gasoline were down for the second time in as many
weeks, as domestic consumption strengthened. This was partially
offset by a rise in imports and domestic production.
The 2.63 million barrels withdrawal - contrary to analysts'
projections for a 1.2 million-barrels increase in supply level -
took gasoline stockpiles down to 221.03 million barrels.
Notwithstanding this reduction, the existing inventory level of
the most widely used petroleum product is 6.4% higher than the
year-earlier level and is well above the top half of the average
Distillate fuel supplies (including diesel and heating oil) were
up 3.04 million barrels last week, significantly outpacing
analysts' expectations for a 1.4 million barrels build in
inventory level. The increase in distillate fuel stocks - the
second in 3 weeks - could be attributed to weaker demand and
higher production, somewhat negated by the effects of lower
At 123.81 million barrels, distillate supplies are 2.4% above the
year-ago level but is close to the lower limit of the average
range for this time of the year.
Refinery utilization edged up 0.2% from the prior week to 92.4%.
The analysts were expecting the refinery run rate to increase
0.3% to 92.5%.
Stocks to Consider
With spot crude price pushing through $100 a barrel, brokerage
analysts are likely to upgrade their forecasts on oil-weighted
companies and related support plays, leading to positive estimate
revisions. While all crude-focused stocks - including behemoths
Exxon Mobil Corp.
) - stand to benefit from rising commodity prices, companies in
the exploration and production (E&P) sector are the best
placed, as they will be able to extract more value for their
In particular, one can look at
PetroQuest Energy Inc.
) as a good buying opportunity. This domestic upstream energy
operator - sporting a Zacks Rank #1 (Strong Buy) - has a solid
secular growth story with potential to rise significantly from
CHEVRON CORP (CVX): Free Stock Analysis
MCGRAW HILL FIN (MHFI): Free Stock Analysis
PETROQUEST ENGY (PQ): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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