Oil Supplies Swell On Lower Refinery Runs

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a big jump, as refiners scaled down their utilization rates to lowest in 5 months. The report further revealed that within the ‘refined products’ category, gasoline stocks rose, while distillate supplies were down from the week-ago level.

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 Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and ConocoPhillips (COP). With an improvement/deterioration in the companies’ ability to generate positive earnings surprises, they can then move higher/lower from their current Zacks Rank #3 (Hold).

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories climbed 6.81 million barrels for the week ending Oct 4, 2013, following an increase of 5.47 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. (MHFI) – had expected crude stocks to go up some 2.2 million barrels. A sharp drop in refinery utilization rates on the back of seasonal maintenance, together with higher production, led to the massive stockpile build-up with the world's biggest oil consumer even as imports pulled back.

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 – were down 168,000 barrels from the previous week’s level to 32.62 million barrels. Stocks are currently at their lowest since Feb last year and 37.1% under the all-time high of 51.86 million barrels reached in Jan.

Following the third inventory increase in as many weeks, at 370.54 million barrels, current crude supplies are up 1.1% from the year-ago period and is over the upper limit of the average for this time of the year. The crude supply cover was up from 23.1 days in the previous week to 23.9 days. In the year-ago period, the supply cover was 24.8 days.

Gasoline: Supplies of gasoline were up for the fourth time in 5 weeks despite a rise in domestic consumption. The slight build in gasoline inventories could be attributed to a climb in production and imports.

The paltry 149,000 barrels gain – compared to analysts’ projections for a much bigger 1.3 million-barrels increase in supply level – took gasoline stockpiles up to 219.88 million barrels. Following this build, the existing inventory level of the most widely used petroleum product is 12.5% higher than the year-earlier level and is at the top of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 3.14 million barrels last week, significantly higher than analysts’ expectations for a 1.9 million barrels fall in inventory level. The decrease in distillate fuel stocks – the fourth in as many weeks – could be attributed to lower production, somewhat negated by strong imports.

At 126.04 million barrels, distillate supplies are 4.2% above the year-ago level but is close to the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 3% from the prior week to 86.0%. The analysts were expecting the refinery run rate to decrease 1% to 88.0%.

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