The U.S. Energy Department's weekly inventory release showed
that crude stockpiles logged a surprise increase, as production
climbed to its highest level in 24 years. The report further
revealed that gasoline and distillate supplies were down from the
week-ago levels. Meanwhile, refiners unexpectedly scaled up their
utilization rates by 0.2%.
Despite the unsupportive crude data from the U.S. government,
the ongoing unrest in Syria that could destabilize the
resource-rich Middle East and further tighten the global supply
picture, pushed the commodity's price above $110 a barrel.
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
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 climbed 2.99 million barrels for the week ending Aug
23, 2013, following a decrease of 1.43 million barrels in the
The analysts surveyed by Platts - the energy information arm
McGraw-Hill Financial Inc.
) - had expected crude stocks to go down some 1 million barrels.
A sharp uptick in the level of imports and a spike in domestic
production - now at their highest level since 1989 - led to the
surprise stockpile build-up with the world's biggest oil
However, 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 837,000 barrels from the
previous week's level to 36.59 million barrels. Stocks are
currently at their lowest since Mar last year and 29.5% under the
all-time high of 51.86 million barrels reached in Jan.
Despite the weekly inventory increase, at 362.05 million
barrels, current crude supplies are down slightly (by 0.7%) from
the year-ago period, though it is still close to the upper limit
of the average for this time of the year. The crude supply cover
was up from 22.7 days in the previous week to 22.9 days. In the
year-ago period, the supply cover was 23.5 days.
Supplies of gasoline were down for the third time in as many
weeks despite a decline in domestic consumption and rising
imports. The fall in gasoline inventories could be attributed to
The 587,000 barrels withdrawal - below analysts' projections
for a 1.5 million-barrels decrease in supply level - took
gasoline stockpiles down to 217.81 million barrels.
Notwithstanding this drawdown, the existing inventory level of
the most widely used petroleum product is 8.3% higher than the
year-earlier level and is in the top half of the average
Distillate fuel supplies (including diesel and heating oil) were
edged down 316,000 barrels last week, counter to analysts'
expectations for a 1 million barrels rise in inventory level. The
decrease in distillate fuel stocks - the first in 4 weeks - could
be attributed to strengthening demand, partially offset by higher
At 129.04 million barrels, distillate supplies are 2.3% 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 91.2%.
The analysts were expecting the refinery run rate to decrease
0.5% to 90.5%.
Stocks to Consider
With spot crude price staying strong - at around $110 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 like
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
Matador Resources Co.
) - a small-cap, undervalued E&P player - as a good buying
opportunity. Dallas TX-based Matador Resources, sporting a Zacks
Rank #1 (Strong Buy), with current focus on the high-return Eagle
Ford shale formation in South Texas, is expected to witness
earnings growth of 287% in 2013.
Moreover, a price-to-book (P/B) ratio of just 2.5 suggests
that the stock is still undervalued. In fact, shares of Matador
Resources have risen from $12.78 to $17.42 since we recommended
Crude Prices Surge: 3 Stocks to Buy Now
on Jul 22.
CHEVRON CORP (CVX): Free Stock Analysis
MCGRAW HILL FIN (MHFI): Free Stock Analysis
MATADOR RESOURC (MTDR): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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