U.S. Crude, Fuel Supplies Fall - Analyst Blog

By Zacks | November 26, 2012 AAA

The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged a surprise decline, as imports fell. The report further revealed that refined product inventories - gasoline and distillate - decreased from their previous week levels. Meanwhile, refiners scaled up their utilization rates by 1.5%.

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 companies engaged in the oil and refining industry, such as ExxonMobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero Energy Corp. (VLO) and Tesoro Corp. (TSO).

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories fell by 1.47 million barrels for the week ending November 16, 2012, following a climb of 1.09 million barrels in the previous week.

The analysts surveyed by Platts - the energy information arm of McGraw-Hill Companies Inc. (MHP), had expected oil stocks to go up some 1 million barrels. An uptick in refinery utilization rates and lower imports led to the stockpile drawdown with the world's biggest oil consumer.

However, crude inventories at the Cushing terminal in Oklahoma - the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange - jumped 1.47 million barrels from the previous week's level to 45.15 million barrels. Stocks are currently just under the all-time high of 47.78 million barrels reached in June.

At 374.47 million barrels, current crude supplies are 13.2% above the year-earlier level, and comfortably exceed the upper limit of the average for this time of the year. The crude supply cover was down from 25.5 days in the previous week to 25.4 days. In the year-ago period, the supply cover was 22.6 days.

Gasoline: Supplies of gasoline were down for the second time in as many weeks despite domestic consumption declining marginally. The fall in gasoline inventories could be attributed to plummeting Gulf Coast stocks.

The 1.55 million barrels drop - compared to analyst projections for a 1.25 million barrels increase in supply level - took gasoline stockpiles down to 200.39 million barrels. As a result of this decrease, the existing inventory level of the most widely used petroleum product is now 4.4% off the year-earlier levels and is in the lower half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) dropped by 2.67 million barrels last week, much higher than analysts' expectations for a 1 million barrels decrease in inventory level. The sharp decline in distillate fuel stocks - the ninth in 10 weeks - could be attributed to stronger demand and lower imports, partially offset by higher production.

At 112.84 million barrels, distillate supplies are 15.2% below the year-ago level and are well under the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 1.5% from the prior week to 87.5%. The analysts were expecting the refinery run rate to go up by 0.7%.

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