The U.S. Energy Department's weekly inventory release showed
that crude stockpiles logged a large decline. The report further
revealed that refined product inventories - gasoline and
distillate - both decreased from their previous week levels on
strengthening demand. Meanwhile, refiners continue to operate at
utilization rates that are highest for this time of year since
The supportive crude data from the U.S. government, together with
the news that the Federal Reserve has decided to leave its
monetary stimulus program intact, has again nudged the commodity
above $108 a barrel even as Syrian tensions eased.
Traders had voiced concerns that Fed's shift away from the bond
buying policy may lead to dollar-denominated oil prices to
increase in local-currency terms in emerging markets, thus
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 fell by 4.37 million barrels for the week ending Sep
13, 2013, following a decrease of a marginal 219,000 barrels in
the previous week.
The analysts surveyed by Platts - the energy information arm of
McGraw-Hill Financial Inc.
) - had expected crude stocks to go down some 1.5 million
barrels. Continued strength in refinery processing rates and
lower imports led to the lar
pile drawdown with the world's biggest oil consumer even as
domestic production continued to spike, now at their highest
level since 1989.
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 861,000 barrels from
the previous week's level to 33.26 million barrels. Stocks are
currently at their lowest since Feb last year and 35.9% under the
all-time high of 51.86 million barrels reached in Jan.
Following the tenth inventory decrease in 12 weeks, at 355.63
million barrels, current crude supplies are down 3.3% from the
year-ago period but are close to the upper limit of the average
for this time of the year. The crude supply cover was down from
22.7 days in the previous week to 22.3 days. In the year-ago
period, the supply cover was 24.8 days.
Supplies of gasoline were down for the fifth time in 6 weeks, as
domestic consumption strengthened. This was partially offset by
higher imports and production.
The 1.63 million barrels withdrawal - compared to analysts'
projections for an unchanged supply level - took gasoline
stockpiles down to 216.02 million barrels. Notwithstanding this
drawdown, the existing inventory level of the most widely used
petroleum product is 10.0% higher than the year-earlier level and
is in the top half of the average range.
Distillate fuel supplies (including diesel and heating oil) were
down 1.08 million barrels last week, as against analysts'
expectations for a 1 million barrels rise in inventory level. The
decrease in distillate fuel stocks - the first in 3 weeks - could
be attributed to robust demand and lower imports, somewhat
negated by higher production.
At 131.09 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, at 92.5%, remained unchanged from the prior
Stocks to Consider
With spot crude price staying strong - at around $108 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 an astounding 431% in 2013.
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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