Crude Supplies Jump to 11-Month High - Analyst Blog


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The U.S. Energy Department's weekly inventory release showed that crude stockpiles jumped to their highest level since May 2011, as imports climbed. However, on the bullish side, the agency's report revealed that refined product inventories - gasoline and distillate - dropped sharply from their previous week levels on stronger demand. Meanwhile, refinery utilization rate reflected an increase of 0.8%.

The Energy Information Administration ("EIA") Petroleum Status Report, which contains data for the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.

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 businesses of companies engaged in the oil and refining industry, such as ExxonMobil Corp. ( XOM ), Chevron Corp. ( CVX ), ConocoPhillips ( COP ), Valero Energy Corp. ( VLO ) and Tesoro Corp. ( TSO ).

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories rose by 3.86 million barrels for the week ending April 13, 2012, after climbing by 2.79 million barrels the week before. In fact, oil supplies have shot up by 22.76 million barrels over the past month, the largest four-week accumulation since February 2009.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. ( MHP ), had expected oil stocks to go up some 400,000 barrels. An uptick in the level of imports led to the stockpile build-up with the world's biggest oil consumer even as refiners improved their utilization rates.

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 - increased by 592,000 barrels from previous week's level to 41.18 million barrels, the most since the week ending May 6, 2011. Stocks reached an all-time high of 41.90 million barrels in April last year.

At 369.05 million barrels, current crude supplies are 3.4% above the year-earlier level, and are in the upper limit of the average for this time of the year. The crude supply cover was up from 25.2 days in the previous week to 25.4 days. In the year-ago period, the supply cover was 25.1 days.

Gasoline: Supplies of gasoline decreased for the ninth consecutive week as domestic consumption edged up and imports plunged. In particular, stockpiles on the East Coast - currently confronted with the prospect of three refinery shutdowns this summer - declined 2.30 million barrels.

The 3.67 million barrels drop - contrary to projections for a stock build - took gasoline stockpiles down to 213.97 million barrels, the lowest since November last year. The existing inventory level of the most widely used petroleum product is 2.8% above the year-earlier levels and is in the upper limit of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) decreased by 2.91 million barrels last week, compared to analyst expectations for an unchanged inventory level. The fall in distillate fuel stocks - the eighth decline in 10 weeks - could be attributed to stronger demand, partially offset by higher imports and production.

At 128.98 million barrels, distillate supplies are 13.0% below the year-ago level and are in the middle of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 0.8% from the prior week at 84.6%, in line with analyst with expectations.

CONOCOPHILLIPS ( COP ): Free Stock Analysis Report
CHEVRON CORP ( CVX ): Free Stock Analysis Report
MCGRAW-HILL COS ( MHP ): Free Stock Analysis Report
TESORO CORP ( TSO ): Free Stock Analysis Report
VALERO ENERGY ( VLO ): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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