The U.S. Energy Department's inventory release showed that crude stockpiles recorded a drop for the second straight week. The report further revealed that within the 'refined products' category, gasoline stocks rose, while distillate supplies were down from the week-ago level. Meanwhile, refiners scaled down their utilization rates.
Oil traders chose to overlook bullish impact from lower crude inventories to focus on the large buildup in gasoline stocks that signal the onset of a tepid demand season for the motor fuel following the end of the summer driving months. Others were worried about the falling refinery runs, which turns into less oil processed. As a result, West Texas Intermediate (WTI) crude futures fell 4.1% to settle at $44.48 per barrel Wednesday, the lowest in more than a week.
This also prompted investors to reduce their exposure to oil and related support plays. As a result, market heavyweights like Occidental Petroleum Corp. OXY , Marathon Oil Corp. MRO , Transocean Ltd. RIG , Anadarko Petroleum Corp. APC , Halliburton Co. HAL , Chevron Corp. CVX and ConocoPhillips COP all experienced losses in yesterday's trading.
Analysis of the Data
Crude Oil: The federal government's EIA report revealed that crude inventories fell by 1.93 million barrels for the week ending Sep 18, 2015, following a decline of 2.10 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 down some 700,000 barrels. A pullback in the level of imports (especially in the Gulf Coast) led to the larger-than-expected stockpile drawdown with the world's biggest oil consumer even as refinery usage slipped.
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 down 462,000 barrels from the previous week's level to 54.04 million barrels.
Notwithstanding the second consecutive weekly inventory decline, at 453.97 million barrels, current crude supplies are up 27% 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 remained unmoved from the previous week's 27.8 days. In the year-ago period, the supply cover was 21.9 days.
Gasoline: Supplies of gasoline were up for the fourth time in 5 weeks, as production jumped. The 1.37 million barrels rise - compared to analysts' projections for a 450,000 barrels increase in supply level - took gasoline stockpiles to 218.76 million barrels. After last week's build, the existing stock of the most widely used petroleum product is 4% higher than the year-earlier level and is in the top half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) fell 2.09 million barrels last week, contrary to analysts' expectations for a 1.25 million barrels rise in inventory level. The surprise decrease in distillate fuel stocks - first in 18 weeks - could be attributed to a spurt in demand. But at 151.88 million barrels, distillate supplies are still 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 2.2% from the prior week to 90.9%. The falling refinery runs reflect slowing operations at the start of the fall maintenance season.
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.