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Crude Rises as Lower Production Forecast Offsets Stock Build

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles rose much more than expected. Moreover, the report further revealed that refined product supplies - gasoline and distillate - both increased from their previous week levels.

Overall though, the bearish news of an increase in domestic commercial crude inventories was overshadowed by another set of federal data - the Short term Energy Outlook - that indicated a slowdown in oil production through next year. As a result, West Texas Intermediate (WTI) crude futures rose 4% to settle at $45.92 per barrel Wednesday.

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories increased by 2.57 million barrels for the week ending Sep 4, 2015, following a climb of 4.67 million barrels in the previous week.

The analysts surveyed by Platts - the energy information arm of McGraw-Hill Financial Inc. - had expected crude stocks to go up some 300,000 barrels. A sharp drop in refinery utilization rates led to the larger-than-expected stockpile build with the world's biggest oil consumer even as domestic production and imports fell.

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 897,000 barrels from the previous week's level to 56.41 million barrels.

Following the third inventory rise in 4 weeks, at 458 million barrels, current crude supplies are up 28% from the year-ago period and are near the highest level during this time of the year in 80 years at least. The crude supply cover was up from 27.3 days in the previous week to 27.8 days. In the year-ago period, the supply cover was 21.8 days.

Gasoline: Supplies of gasoline were up for the second time in 3 weeks, as demand weakness more than offset the fall in imports and production. The modest 384,000 barrels rise - compared to analysts' projections for an unchanged supply level - took gasoline stockpiles up to 214.55 million barrels. After last week's draw, the existing stock of the most widely used petroleum product is 1% higher than the year-earlier level and is in the middle of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose 952,000 barrels last week, slightly higher than analysts' expectations for a 700,000 barrels rise in inventory level. The increase in distillate fuel stocks - sixteenth in as many weeks - could be attributed to lower demand and strength in IMPORTS. At 150.90 million barrels, distillate supplies are 18% above 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 1.9% from the prior week to 90.9%.

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 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 the businesses of the companies engaged in the oil and refining industry.

The data from EIA generally acts as a catalyst for crude prices and affect producers, such as Exxon Mobil Corp. XOM , Chevron Corp. CVX and ConocoPhillips COP , and refiners such as Valero Energy Corp. VLO , Phillips 66 PSX and HollyFrontier Corp. HFC .

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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.


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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