EIA Reports 1st U.S. Crude Inventory Decline in a Month

Oil prices were little changed on Wednesday after the U.S. Energy Department's latest inventory release. The front month West Texas Intermediate (WTI) crude futures lost 0.5% (or 29 cents) to $63.76 per barrel yesterday. The report showed that crude stockpiles recorded a surprise weekly draw - the first in a month. The government data also revealed that both gasoline and distillate inventories declined less than expected.

Overall, crude is being supported by the so-called OPEC+ deal that is cutting production by around 1.2 million barrels per day until the end of June. U.S. sanctions against Venezuela and Iran also continue to tighten the commodity’s fundamentals.

The positive sentiments helped push oil prices to their highest level in five months recently. While crude futures have eased back slightly from their multi-month highs, it continues to remain within touching distance of the $65-a-barrel mark

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.4 million barrels for the week ending Apr 12, following an increase of 7 million barrels in the previous week. The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 1.8 million barrels. Lower imports and an uptick in exports led to the surprise stockpile draw with the world's biggest oil consumer.

On a more positive note, though, the latest report shows that stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 1.5 million barrels to 44.4 million barrels.

At 455.2 million barrels, current crude supplies are 6.5% above the year-ago figure but 2% under the five-year average. The crude supply cover – at 28.5 days – was unchanged from the previous week. In the year-ago period, the supply cover was 25.3 days.

Gasoline: Gasoline supplies tallied a ninth straight week of drops on lower production. The 1.2 million barrels decline – lower than the polled number of 2.5 million barrels fall – took gasoline stockpiles down to 228 million barrels. Following last week’s draw, the stock of the most widely used petroleum product is now 3.4% below the year-earlier and 1% under the five-year range.

Distillate: Distillate fuel supplies (including diesel and heating oil) edged down 362,000 barrels last week, while analysts were looking for an inventory draw of around 1.6 million barrels. The nominal decrease could be attributed to export growth. Current supplies – at 127.7 million barrels – are 1.9% higher than the year-ago level though stocks remain 5% below than the five-year average.

Refinery Rates: Refinery utilization was up by 0.2% from the prior week to 87.7%.

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 ExxonMobil XOM, Chevron CVX and ConocoPhillips COP, and refiners such as Valero Energy VLO, Phillips 66 PSX and Marathon Petroleum MPC.

Want to Own an Energy Stock Now?

While easing oversupply concerns and hopes of U.S.-China trade deal helped oil to bounce back to around $65, it remains to be seen if it can maintain the recent gains. One factor that could undermine the efforts to tighten the market is the seemingly relentless increase in crude oil production across the U.S. shale patch. There are also concerns that a slowing global economy could translate into weak demand for the commodity.

Meaning, there remains a lot of uncertainty around the commodity right now, which can lead to volatility and price fluctuations. At this time, it might be prudent for investors to maintain caution and look for fundamentally sound stocks.

If you are looking for a near-term energy play, Royal Dutch Shell plc RDS.A might be a good selection. Shell has a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hague-based Shell is a major international integrated oil and gas company that divides its operations into four major segments: Upstream, Downstream, Corporate and Integrated Gas. Over 60 days, the company has seen the Zacks Consensus Estimate for 2019 increase 3.4% to $5.21 per share.

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