U.S. Oil Supplies Up for 2nd Week, Adds to Bearish Sentiment

Oil prices dropped 1.4% on Thursday, extending losses from a 3.3% plunge the previous session amid fears of a global economic slowdown and a report from the U.S. government showing a surprise increase in crude stockpiles.

Analysis of the EIA Data

Crude Oil:The federal government’s EIA report revealed that crude inventories rose by 1.6 million barrels for the week ending Aug 9, very different to the 2.7 million barrels drawdown that energy analysts had expected. Lower refinery crude runs and increase in imports largely drove the surprise stockpile build with the world's biggest oil consumer. The second straight weekly rise in inventories puts total domestic stocks at 440.5 million barrels – 6.3% above the year-ago figure and 3% over the five-year average.

Meanwhile, oil prices drew some support from stockpile draw at the Cushing terminal in Oklahoma. The key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange saw inventories decline 2.5 million barrels to 44.8 million barrels.

The crude supply cover was up marginally from 25.4 days in the previous week to 25.5 days. In the year-ago period, the supply cover was 23.6 days.

Turning to products, and it is a fairly bullish story.

Gasoline:Gasoline supplies fell 1.4 million barrels as demand for the fuel increased by 281,000 barrels per day to a record 9.93 million barrels per day. Analysts had forecast 700,000 barrels decline. At 233.8 million barrels, the current stock of the most widely used petroleum product is unchanged from the year-earlier level but exceeds the five-year average range by 4%.

Distillate:Distillate fuel supplies (including diesel and heating oil) fell 1.9 million barrels last week on lower production and imports, while analysts were looking for an inventory climb of 870,000 barrels. Current supplies – at 135.5 million barrels – are 5% higher than the year-ago level though stocks remain 3% below than the five-year average.

Refinery Rates:Refinery utilization was down 1.6% from the prior week to 94.8%.

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 Royal Dutch Shell RDS.A, Chevron CVX and ConocoPhillips COP – all carrying Zacks Rank #3 (Hold) – and refiners such as Valero Energy VLO, Phillips 66 PSX and Marathon Petroleum MPC.

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

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