U.S. Crude Jumps on Low Supply Build, Fed Statement

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded an increase - the fifth in a row - to rise to another all-time high. What's more, supplies at the Cushing, OK storage hub also jumped to its highest level on record.

However, oil traders chose to overlook bearish impact from higher crude inventories to focus on the magnitude of the build that was considerably lower than expected. Additional support came from encouraging gasoline demand figures over the last 4 weeks, which were up 6.4% year over year.

Things were further helped by the precipitous fall in dollar following a dovish Fed statement and continued talks of a meeting between representatives of major producers to possibly freeze output. As a result, West Texas Intermediate (WTI) crude futures jumped 5.8% (or $2.12) to settle at $38.46 per barrel Wednesday.

This also prompted investors to increase their exposure to oil and related support plays. Market heavyweights like Marathon Oil Corp. MRO , Nabors Industries Ltd. NBR , Chevron Corp. CVX , Chesapeake Energy Corp. CHK , Apache Corp. APA , Newfield Exploration Co. NFX and ConocoPhillips COP all experienced gains in yesterday's trading.

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories increased by 1.32 million barrels for the week ending Mar 4, 2016, following a jump of 3.88 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 up by much larger 2.7 million barrels. Sufficient domestic production led to the modest stockpile build with the world's biggest oil consumer even as imports 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 - were up 545,000 barrels from the previous week's level to a record 67.5 million barrels.

Following the fifth successive weekly inventory rise, at 523.18 million barrels, current crude supplies are up 14% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover remained unchanged from the previous week - at 33.0 days. In the year-ago period, the supply cover was 30.0 days.

Gasoline: Supplies of gasoline were down for the fourth time in as many weeks as a rise in consumption more than offset higher production and imports. The 747,000 barrels draw - much less than analysts' polled number of 3.1 million barrels decrease in supply level - took gasoline stockpiles down to 249.72 million barrels. Despite last week's decline, the existing stock of the most widely used petroleum product is 6% 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 1.14 million barrels last week, just about outpacing analysts' expectations for a 1 million barrels fall in inventory level. The decrease in distillate fuel stocks - the third in 4 weeks - could be attributed to stronger demand. At 161.34 million barrels, distillate supplies are 28% above the year-ago level and are above the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was down by a marginal 0.1% from the prior week to 89.0%.

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.

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CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

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MARATHON OIL CP (MRO): 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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