The U.S. Energy Department's weekly inventory release showed
that crude stockpiles logged a smaller-than-expected decline. The
report further revealed that within the 'refined products'
category, gasoline stocks fell, while distillate supplies were up
from the week-ago level. Meanwhile, refiners scaled up their
utilization rates by 0.5%.
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Following the decline in U.S. crude inventories, the high
probability of a military intervention in Syria and a report
showing expansion in domestic services sector, oil prices crept
higher, settling above $108 a barrel.
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 1.84 million barrels for the week ending Aug
30, 2013, following an increase of 2.99 million barrels in the
The analysts surveyed by Platts - the energy information arm of
McGraw-Hill Financial Inc.
) - had expected crude stocks to go down some 2.5 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 1.83 million barrels
from the previous week's level to 34.76 million barrels. Stocks
are currently at their lowest since Feb last year and 33.0% under
the all-time high of 51.86 million barrels reached in Jan.
Despite the eighth inventory decrease in 10 weeks, at 360.21
million barrels, current crude supplies are up slightly (by 0.9%)
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 22.9 days in the previous week to 22.8 days.
In the year-ago period, the supply cover was 23.4 days.
Supplies of gasoline were down for the fourth time in as many
weeks, as domestic consumption strengthened, while production and
The 1.83 million barrels withdrawal - above analysts' projections
for a 1 million-barrels decrease in supply level - took gasoline
stockpiles down to 215.99 million barrels. Notwithstanding this
drawdown, the existing inventory level of the most widely used
petroleum product is still 8.6% higher than the year-earlier
level and is in the top half of the average range.
Distillate fuel supplies (including diesel and heating oil) edged
up 549,000 barrels last week, lower than analysts' expectations
for an 800,000 barrels rise in inventory level. The increase in
distillate fuel stocks - the fourth in 5 weeks - could be
attributed to weakening demand and higher output, partially
offset by lower imports.
At 129.59 million barrels, distillate supplies are 2.0% 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 0.5% from the prior week to 91.7%.
The analysts were expecting the refinery run rate to decrease
0.8% to 90.4%.
Stocks to Consider
With spot crude price staying strong - at around $108 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
Matador Resources Co.
) - a small-cap, undervalued E&P player - as a good buying
opportunity. Dallas TX-based Matador Resources, sporting a Zacks
Rank #1 (Strong Buy), with current focus on the high-return Eagle
Ford shale formation in South Texas, is expected to witness
earnings growth of an astounding 390% in 2013.