Crude Prices Drop Amid Surprise Growth In U.S. Stockpiles

Oil prices dropped 2.1% on Wednesday, extending losses from a 5.7% plunge the previous session amid indication that Saudi Arabia will quickly restore the output they halted due to the drone attack and a report from the U.S. government showing a surprise increase in crude stockpiles. Crude traded below $60 a barrel as investors weighed the prospect of an earlier-than-expected recovery in state-run Saudi Aramco’s affected production.

While the weekend attacks on Saudi Arabia’s energy installations are well documented, below we review the EIA's Weekly Petroleum Status Report for the week ending Sep 13.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 1.1 million barrels, compared to the 2 million barrels drawdown that energy analysts had expected. A combination of higher imports and lower refinery runs largely drove the surprise stockpile build with the world's biggest oil consumer. This puts the total domestic stocks at 417.1 million barrels – 6% above the year-ago figure and 2% lower than 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 647,000 barrels to 38.7 million barrels -- the lowest since November.

The crude supply cover was up from 23.8 days in the previous week to 24.2 days. In the year-ago period, the supply cover was 22.4 days.

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

Gasoline: Gasoline supplies edged up 781,000 barrels as demand for the fuel decreased by 868,000 barrels per day to 8.9 million barrels per day. Analysts had forecast 800,000 barrels decline. At 229.7 million barrels, the current stock of the most widely used petroleum product is 2% below the year-earlier level but exceeds the five-year average range by 4%.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 437,000 barrels last week on higher imports, while analysts were looking for an inventory addition of 300,000 barrels. Current supplies – at 136.2 million barrels – are 2.4% lower than the year-ago level and remain 6% below than the five-year average.

Refinery Rates: Refinery utilization was down 3.9% from the prior week to 91.2%.

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 ExxonMobil (NYSE:XOM) , Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) – all carrying Zacks Rank #3 (Hold) – and refiners such as Valero Energy (NYSE:VLO) , Phillips 66 (NYSE:PSX) and Marathon Petroleum (NYSE:MPC).

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

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