Diverging Trends in U.S. Oil Demand - Analyst Blog


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The U.S. Energy Department's weekly inventory release showed that crude stockpiles increased more than expected on higher imports. 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 was down by 1.5%.

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 3.56 million barrels for the week ending January 20, 2012, after shrinking by 3.44 million barrels last week.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. ( MHP ), had expected oil stocks to go up some 700,000 barrels. Lower refinery utilization rates and surging imports led to the stockpile buildup with the world's biggest oil consumer.

In particular, crude inventories at the Cushing terminal in Oklahoma - the key delivery hub for U.S. crude futures - grew by 374,000 barrels from last week's 26-month low level to 28.65 million barrels. Stocks reached an all-time high of 41.90 million barrels in April last year.

At 334.77 million barrels, current crude supplies are 1.7% 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 22.5 days in the previous week to 22.9 days. In the year-ago period, the supply cover was 23.4 days.

Gasoline: Supplies of gasoline decreased for the first time in four weeks as demand edged higher. Domestic gasoline consumption slid 2.2% to 8 million barrels a day during the previous week, the lowest since September 2001.  

The 390,000 barrels-dip - contrary to projections for a 2.2 million barrels build - took gasoline stockpiles down to 227.13 million barrels. The existing inventory level of the most widely used petroleum product is 1.3% below the year-earlier levels and is in the upper limit of the average range.

Distillate: Distillate fuel inventories (including diesel and heating oil) were down by 2.46 million barrels last week, significantly above analyst expectations for a 300,000 barrels decrease. The decline in distillate fuel supplies - after four consecutive weeks of growth - could be attributed to rising demand and lower imports.

At 145.55 million barrels, distillate supplies are 12.2% 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 down 1.5% from the prior week at 82.2%. Analysts were expecting the refinery run rate to decline 0.5% to 83.2%.

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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