The U.S. Energy Department's weekly inventory release showed
that crude stockpiles logged a small decline. The report further
revealed that refined product inventories - gasoline and
distillate - both increased from their previous week levels on
weakening demand. Meanwhile, refiners scaled up utilization rates
to reach their highest point for this time of year since 2006.
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Importantly, supplies at the Cushing, Oklahoma storage hub
tumbled to its lowest since Feb 2012, helped by improved refinery
runs. This helped crude prices settle above the $107 a barrel
level even as Syrian tensions eased.
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 a marginal 219,000 barrels for the week
ending Sep 6, 2013, following a decrease of 1.84 million 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 2 million barrels.
An uptick in refinery processing rates and lower imports led to
the stockpile 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 639,000 barrels from
the previous week's level to 34.12 million barrels. Stocks are
currently at their lowest since Feb last year and 34.2% under the
all-time high of 51.86 million barrels reached in Jan.
Despite the ninth inventory decrease in 11 weeks, at 359.99
million barrels, current crude supplies are still up slightly (by
0.3%) from the year-ago period and are close to the upper limit
of the average for this time of the year. The crude supply cover
was down marginally from 22.8 days in the previous week to 22.7
days. In the year-ago period, the supply cover was 24.0 days.
Supplies of gasoline were up for the first time in 5 weeks, as
domestic consumption weakened. This was partially offset by lower
The 1.66 million barrels gain - contrary to analysts' projections
for a 1 million-barrels decrease in supply level - took gasoline
stockpiles up to 217.65 million barrels. Following this build,
the existing inventory level of the most widely used petroleum
product is 10.1% higher than the year-earlier level and is in the
top half of the average range.
Distillate fuel supplies (including diesel and heating oil)
jumped 2.59 million barrels last week, significantly higher than
analysts' expectations for an 800,000 barrels rise in inventory
level. The increase in distillate fuel stocks - the fifth in 6
weeks - could be attributed to weakening demand and higher
At 132.17 million barrels, distillate supplies are 2.8% 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 0.8% from the prior week to an
eight-week high level of 92.5%.
Stocks to Consider
With spot crude price staying strong - at around $107 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
Whiting Petroleum Corp.
) - a mid-cap, undervalued E&P player - as a good buying
opportunity. Denver-based Whiting Petroleum, sporting a Zacks
Rank #1 (Strong Buy), with current focus on the high-return
Bakken resource play in North Dakota, is expected to witness
earnings growth of 15% in 2013 and 10% in 2014.