Crude Supplies Climb Marginally - Analyst Blog

The U.S. Energy Department's weekly inventory release showed that crude stockpiles ticked up slightly, as production recovered. The report further revealed that gasoline and distillate supplies were up from the week-ago levels. Meanwhile, refiners scaled up their utilization rates by 0.9% to cross 90% for the first time this year.

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.

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories edged up by a nominal 18,000 barrels for the week ending Jun 21, 2013, following an increase of 313,000 barrels in the previous week.

The analysts surveyed by Platts - the energy information arm of McGraw-Hill Financial Inc. ( MHFI ) - had expected crude stocks to go down some 2 million barrels. An uptick in the level of production led to the surprise stockpile build-up (albeit a minor one) with the world's biggest oil consumer even as refiners improved their utilization rates and imports pulled back.

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 up 664,000 barrels from the previous week's level to 49.26 million barrels. Stocks are currently 5.0% under the all-time high of 51.86 million barrels reached in Jan.

Following the slight weekly inventory increase, at 394.14 million barrels, current crude supplies are 1.8% above the year-earlier level, and exceeds the upper limit of the average for this time of the year. The crude supply cover was down from 25.7 days in the previous week to 25.5 days. In the year-ago period, the supply cover was 24.8 days.

Gasoline: Supplies of gasoline were up for the third time in as many weeks despite a rise in domestic consumption. The spike in gasoline inventories could be attributed to sharply higher imports as well as improvement in production.

The 3.65 million barrels gain - significantly above the analysts' projections for a 1 million-barrels increase in supply level - took gasoline stockpiles up to 225.38 million barrels. Following this build, the existing inventory level of the most widely used petroleum product is 10.1% higher than the year-earlier level and is well above the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 1.57 million last week, higher than analysts' expectations for a 1 million barrels build in inventory level. The increase in distillate fuel stocks - the first in 3 weeks - could be attributed to higher production and imports, together with weaker demand.

At 123.19 million barrels, distillate supplies are 3.6% above the year-ago level but is in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 0.9% from the prior week to 90.2%.

Zacks Rank

A bullish data from the EIA generally acts as a positive catalyst for crude prices and buoy producers, such as Exxon Mobil Corp. ( XOM ), Chevron Corp. ( CVX ) and ConocoPhillips ( COP ). With an improvement in the companies' ability to generate positive earnings surprises, they can then move higher from their current Zacks Rank #3 (Hold).

CONOCOPHILLIPS (COP): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

MCGRAW HILL FIN (MHFI): 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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