Crude Supplies Jump to 7-Month High - Analyst Blog

By Zacks Equity Research,

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles rose to their highest level since August 2011, as imports soared. However, the agency's report further revealed that product demand rose, as a result of which both gasoline and distillate stocks fell from their previous week levels. Meanwhile, refinery utilization rate reflected an increase of 2.3%.

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 climbed by 7.10 million barrels for the week ending March 23, 2012, after shrinking by 1.16 million barrels the week before.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. ( MHP ) , had expected oil stocks to go up some 2.75 million barrels. A sharp rise 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 - jumped by 1.04 million barrels from previous week's level to 39.56 million barrels, the most since the week ending May 27, 2011. Stocks reached an all-time high of 41.90 million barrels in April last year.

At 353.39 million barrels, current crude supplies are 0.7% below the year-earlier level, but are in the upper limit of the average for this time of the year. The crude supply cover was up from 23.9 days in the previous week to 24.4 days. In the year-ago period, the supply cover was 25.0 days.

Gasoline: Supplies of gasoline decreased for the sixth consecutive week as domestic consumption rose 4.0% to 8.71 million barrels a day and imports dropped.

The 3.54 million barrels plunge - much higher than projections - took gasoline stockpiles down to 223.37 million barrels. The existing inventory level of the most widely used petroleum product is 3.0% above the year-earlier levels and is in the upper limit of the average range.

Distillate: Distillate fuel inventories (including diesel and heating oil) decreased by 711,000 barrels last week, below analyst expectations for a 1.0 million barrel decrease. The fall in distillate fuel supplies - the sixth decline in 7 weeks - could be attributed to stronger demand and lower imports, partially offset by slightly higher output.

At 135.87 million barrels, distillate supplies are 11.4% 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 2.3% from the prior week at 84.5%. Analysts were expecting the refinery run rate to increase 0.5% to 82.7%.

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.

This article appears in: Investing , Business , Stocks
Referenced Stocks: COP , CVX , MHP , TSO , VLO

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