The U.S. Energy Department's weekly inventory release showed
that crude stockpiles logged a smaller-than-expected decline,
thereby pulling down the commodity's price to under $105 a
barrel. On a further bearish note, the report revealed that
gasoline and distillate supplies were up from the week-ago
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 1.32 million barrels for the week ending Aug
02, 2013, following an increase of 431,000 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 2.0 million
barrels. A drop in the level of imports led to the stockpile
drawdown with the world's biggest oil consumer even as crude
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 2.25 million barrels
from the previous week's level to 39.87 million barrels. Stocks
are currently 23.1% under the all-time high of 51.86 million
barrels reached in Jan.
As a result of the fifth weekly inventory decline in 6 weeks, at
363.30 million barrels, current crude supplies have gone 1.8%
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 remained at 22.7 days - same as in the previous
week. In the year-ago period, the supply cover was 23.7 days.
Supplies of gasoline were up for the second time in as many weeks
despite a rise in domestic consumption and fall in imports. The
slight build in gasoline inventories could be attributed to a
rise in domestic production.
The 135,000 barrels gain - contrary to analysts' projections for
a 1 million-barrels decrease in supply level - took gasoline
stockpiles up to 223.60 million barrels. Following this spike,
the existing inventory level of the most widely used petroleum
product is 8.5% higher than the year-earlier level and is above
the top half of the average range.
Distillate fuel supplies (including diesel and heating oil) were
up 469,000 barrels last week, again defying analysts'
expectations for a 1 million barrels fall in inventory level. The
increase in distillate fuel stocks - the first in 3 weeks - could
be attributed to weaker demand and higher production, somewhat
negated by the effects of lower imports.
At 126.46 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 down 0.4% from the prior week to
90.9%. The analysts were expecting the refinery run rate to
increase 0.2% to 91.5%.
Stocks to Consider
With spot crude price staying strong - at around $105 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
Range Resources Corp.
) as a good buying opportunity. This domestic upstream energy
operator with focus on high yield, liquid-rich fields and
sporting a Zacks Rank #1 (Strong Buy), has a solid secular growth
story with potential to rise significantly from current level.
CHEVRON CORP (CVX): Free Stock Analysis
MCGRAW HILL FIN (MHFI): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
To read this article on Zacks.com click here.