Crude Stocks Dip but Output Soars - Analyst Blog

The U.S. Energy Department's weekly inventory release showed that crude stockpiles declined, as imports fell even though production climbed to its highest level in 19 years. The report further revealed that refined product inventories - gasoline and distillate - increased from their previous week levels. Meanwhile, refiners scaled down their utilization rates by 1.2%.

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, 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 fell by 586,000 barrels for the week ending December 21, 2012, following a drop of 964,000 barrels in the previous week.

The analysts surveyed by Platts - the energy information arm of McGraw-Hill Companies Inc. ( MHP ), had expected oil stocks to go down some 2 million barrels. A sharp drop in the level of imports led to the stockpile drawdown with the world's biggest oil consumer even as refiners reduced their utilization rates and domestic production continued to spike, now at their highest level since 1993.

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 - soared 2.21 million barrels from the previous week's level to hit a new all-time high of 49.18 million barrels.

At 371.06 million barrels, current crude supplies are 13.3% above the year-earlier level, and comfortably exceed the upper limit of the average for this time of the year. The crude supply cover edged down from 24.1 days in the previous week to 24.0 days. In the year-ago period, the supply cover was 22.2 days.

Gasoline: Supplies of gasoline were up for the fifth time in as many weeks on the back of rising imports and production.

The 3.78 million barrels jump - significantly ahead of the analysts' projections for a paltry 250,000 barrels increase in supply level - took gasoline stockpiles up to 223.10 million barrels. As a result of this build, the existing inventory level of the most widely used petroleum product is 2.5% higher than the year-earlier level and is well above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) gained 2.42 million barrels last week, contrary to the analysts' expectations for a 350,000 barrels draw in inventory level. The surprise rise in distillate fuel stocks - the third in 4 weeks - could be attributed to weaker demand and higher production, partially offset by lower imports.

At 119.39 million barrels, distillate supplies are 15.0% below the year-ago level and are under the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization nudged down 1.2% from the prior week to 90.3%.

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.

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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