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U.S. Oil Prices Jump as EIA Reports Largest Draw Since 2016

Nilanjan Choudhury

The U.S. Energy Department's inventory release showed that crude stocks slumped nearly 13 million barrels last week in the biggest weekly drawdown since September 2016 as exports hit a record high.

Oil Prices Jump on the News

Following the massive decline, U.S. benchmark crude futures gained as much as 2.7% (or $1.55) to $59.38 per barrel Wednesday – the best settlement in more than a month.

The federal data sparked widespread buying in energy stocks, which pushed the Energy Select Sector SPDR – an assortment of the largest U.S. energy companies – up more than 1.5% Wednesday. Consequently, some of, the biggest gainers of the S&P 500 included energy-related names like – Marathon Petroleum Corporation MPC, ConocoPhillips COP, Hess Corporation HES, Valero Energy Corporation VLO and Marathon Oil Corporation MRO.

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Meanwhile, gasoline futures shot up 5% to $1.970 a gallon on Philadelphia Energy Solutions’ decision to permanently close its oil refinery in Philadelphia following last week’s devastating fire.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories plunged by 12.8 million barrels for the week ending Jun 21, the most in nearly three years and more than 4.5 times what energy analysts had expected. Sharply lower imports and jump in exports led to the massive stockpile draw with the world's biggest oil consumer.

Crude exports averaged a record 3.77 million barrels per day last week, up 348,000 barrels per day (bpd) from the previous week. Meanwhile, net imports fell 811,000 bpd.

The past week’s big decline in oil inventories comes as a relief for industry watchers who saw supplies trend mostly higher since mid-March. In fact, prior to this decrease, stockpiles expanded in 9 of the last 13 weeks and were up nearly 43 million barrels (or 10%) during the period.

Adding to the positive sentiment, the latest report also shows that stocks at the Cushing terminal in Oklahoma came down from their highest since December 2017. Inventories at the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange was down 1.7 million barrels to 51.8 million barrels.

But at 469.6 million barrels, current crude supplies are still 12.7% above the year-ago figure and 5% over the five-year average. The crude supply cover was down from 28.4 days in the previous week to 27.4 days. In the year-ago period, the supply cover was 23.7 days.

Gasoline: Gasoline supplies fell 996,000 barrels for its second successive weekly decline. The drop – slightly below the polled number of 1.1 million barrels – came on account of lower imports of the fuel, which edged down 21,000 bpd. At 232.2 million barrels, the stock of the most widely used petroleum product is now 3.7% below the year-earlier level and at the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell 2.4 million barrels last week, while analysts were looking for an inventory drop of around 1.1 million barrels. Current supplies – at 125.4 million barrels – are 6.8% higher than the year-ago level though stocks remain 7% below than the five-year average.

Refinery Rates: Refinery utilization was up by 0.3% from the prior week to 94.2%.

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In case you are looking for a near-term energy play, Helix Energy Solutions Group, Inc. HLX might be an excellent selection. The specialty services provider to offshore energy companies has a Zacks Rank #1 (Strong Buy).

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Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report
 
Hess Corporation (HES) : Free Stock Analysis Report
 
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
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