U.S. Crude Supplies on the Rise - Analyst Blog


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The U.S. Energy Department's weekly inventory release showed a marginal build-up in crude stockpiles, as supplies at the Cushing Storage Hub reached their highest level since July 2011. The agency's report further revealed that despite gasoline and distillate stocks declining from their previous week levels, product demand continues to be weak. Meanwhile, refinery utilization rate reflected a small increase of 0.3%.

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 rose by 832,000 barrels for the week ending March 02, 2012, after jumping by 4.16 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 2 million barrels. Surging inventories at Cushing and soft demand 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 traded on the New York Mercantile exchange - grew by 2.37 million barrels from last week's level to 36.18 million barrels, the most since the week ending July 22, 2011. Stocks reached an all-time high of 41.90 million barrels in April last year.

At 345.70 million barrels, current crude supplies are 0.9% below the year-earlier level, but are in the upper limit of the average for this time of the year. The crude supply cover remained flat week over week at 23.5 days. In the year-ago period, the supply cover was 25.3 days.

Gasoline: Supplies of gasoline decreased for the third consecutive week even as domestic consumption fell 1.2% to 8.26 million barrels a day. The reduction in gasoline inventories could be attributed to lower production and a drop in imports.

The 396,000 barrels dip - much lower than that of projections - took gasoline stockpiles down to 229.53 million barrels. The existing inventory level of the most widely used petroleum product is marginally above 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 1.94 million barrels last week, well above analyst expectations for a 1.5 million barrels decrease. The fall in distillate fuel supplies - for the fourth consecutive week - could be attributed to lower production and a decline in imports, partially offset by weak demand.

At 139.50 million barrels, distillate supplies are 10.1% 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 0.3% from the prior week at 83.9%. Analysts were expecting the refinery run rate to decline 0.4% 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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