The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a lower-than-expected drop. The report further revealed that refined product inventories - gasoline and distillate - both decreased from their previous week levels.
However, oil traders were looking for a larger crude draw and were disappointed by the quantum of the decline. As a result, West Texas Intermediate (WTI) crude futures dropped 4.8% (or $2.29) to settle at $45.14 per barrel Thursday - the lowest in two months.
Analysis of the EIA Data
Crude Oil: The federal government's EIA report revealed that crude inventories decreased by 2.22 million barrels for the week ending July 1, 2016, following a decline of 4.05 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 down some 2.6 million barrels. Lower production led to the stockpile drawdown with the world's biggest oil consumer even as imports surged and refinery usage fell.
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 - edged down 82,000 barrels from previous week's level to 64.15 million barrels.
Despite the eighth inventory decline in 9 weeks, at 524.35 million barrels, current crude supplies are up 13% from the year-ago period and are at the highest level during this time of the year.
The crude supply cover was down from 31.9 days in the previous week to 31.7 days. In the year-ago period, the supply cover was 28.3 days.
Oils-Energy Sector Price Index
Gasoline: Supplies of gasoline were down for the first time in 3 weeks as demand strengthened and imports fell. The small 59,000 barrels draw - much less than the analysts' polled number of 900,000 barrels decrease in supply level - took gasoline stockpiles down to 238.88 million barrels. Despite last week's decrease, the existing stock of the most widely used petroleum product is 10% higher than the year-earlier level and is comfortably above the upper half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) fell 1.57 million barrels last week, easily outpacing analysts' expectations for a 500,000 barrels drop in inventory level. The decrease in distillate fuel stocks - for the second successive week - could be attributed to lower production. At 148.94 million barrels, distillate supplies are 8% higher than the year-ago level and are well above the upper half of the average range for this time of the year.
Refinery Rates: Refinery utilization was down by 0.5% from the prior week to 92.5%.
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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