The U.S. Energy Department's weekly inventory release showed
that crude stockpiles recorded a big jump, as imports climbed and
refiners scaled down their utilization rates. The report further
revealed that within the 'refined products' category, gasoline
stocks rose, while distillate supplies were down from the
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Despite the unsupportive data from the U.S. government, crude
gained handsomely on Wednesday - climbing 2% to settle at $104.10
a barrel - following reports that the southern portion of
) Keystone pipeline will be completed by the end of October. This
is a major initiative that allows the crude glut at the Cushing
oil-storage hub in Oklahoma to be unlocked.
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 climbed 5.47 million barrels for the week ending Sep
27, 2013, following an increase of 2.64 million barrels in the
The analysts surveyed by Platts - the energy information arm of
McGraw-Hill Financial Inc.
) - had expected crude stocks to go up some 2.4 million barrels.
A sharp uptick in the level of imports and drop in refinery
utilization rates led to the massive stockpile build-up with the
world's biggest oil consumer.
However, 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 59,000 barrels from the
previous week's level to 32.79 million barrels. Stocks are
currently at their lowest since Feb last year and 36.8% under the
all-time high of 51.86 million barrels reached in Jan.
Despite the second inventory increase in 2 weeks, at 363.73
million barrels, current crude supplies are still down slightly
(by 0.3%) from the year-ago period, though it is close to the
upper limit of the average for this time of the year. The crude
supply cover was up from 22.6 days in the previous week to 23.1
days. In the year-ago period, the supply cover was 24.8 days.
Supplies of gasoline were up for the third time in 4 weeks, as
domestic consumption weakened and imports climbed. This was
partially offset by lower production.
The 3.50 million barrels gain - contrary to analysts' projections
for a 1.4 million-barrels decrease in supply level - took
gasoline stockpiles up to 219.73 million barrels. Following this
build, the existing inventory level of the most widely used
petroleum product is 12.1% higher than the year-earlier level and
is at the top of the average range.
Distillate fuel supplies (including diesel and heating oil) were
down 1.68 million barrels last week, slightly lower than
analysts' expectations for a 1.8 million barrels fall in
inventory level. The decrease in distillate fuel stocks - the
third in as many weeks - could be attributed to strong demand and
lower imports, somewhat negated by higher production.
At 129.18 million barrels, distillate supplies are 4.1% above the
year-ago level but is close to the lower limit of the average
range for this time of the year.
Refinery utilization was down 1.3% from the prior week to 89.0%.
The analysts were expecting the refinery run rate to decrease
1.1% to 89.2%.
Stocks to Consider
With spot crude price staying strong - at around $104 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
Stone Energy Corp.
) - a small-cap, undervalued E&P player - as a good buying
opportunity. Lafayette, Louisiana-based Stone Energy, sporting a
Zacks Rank #1 (Strong Buy), with current focus on the Gulf of
Mexico and the Appalachia regions, is expected to witness
consistent earnings growth from its multi-year inventory of