U.S. Crude Supplies Jump But Product Stocks Fall Sharply

The U.S. Energy Department's inventory release showed that crude stockpiles recorded a massive weekly build as domestic oil production reached another all-time high. However, product inventories (gasoline and distillate) fell sharply, which offset the bearish impact of the crude oil inventory increase.

The front month West Texas Intermediate (WTI) crude futures ended at $61.19 per barrel yesterday.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 5 million barrels for the week ending Mar 9, following an increase of 2.4 million barrels in the previous week. The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 2.5 million barrels.

Record high domestic production led to the massive stockpile build with the world's biggest oil consumer even as imports fell and refiner demand strengthened.

In particular, U.S. output rose by 12,000 barrels per day last week to nearly 10.4 million barrels per day – the most since the EIA started maintaining weekly data in 1983. In early February, oil production broke through the 10 million barrels a day threshold for the first time in nearly 50 years and has maintained the record levels thereafter.

While oil inventories rose for a third successive week, stockpiles have shrunk in 35 of the last 49 weeks and are down more than 100 million barrels since April last year. The gradual fall has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 430.9 million barrels, current crude supplies are 18.4% below the year-ago period and are in the bottom half of the average range during this time of the year.

Meanwhile, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was up by 338,000 barrels to 28.5 million barrels. It is the first time in 12 weeks that Cushing inventories have increased after dropping to the lowest level since December 2014.

The crude supply cover was up from 26.7 days in the previous week to 26.9 days. In the year-ago period, the supply cover was 34.1 days.

Gasoline: Gasoline supplies recorded their second weekly decrease in a row as demand strengthened. The 6.3 million barrels draw – significantly above the polled number of 500,000 barrels fall in supply level – took gasoline stockpiles down to 244.8 million barrels. Following last week’s hefty decline, the stock of the most widely used petroleum product remains just below the year-earlier level though it is in the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 4.4 million barrels last week, comfortably exceeding analysts’ expectations for 1.6 million barrels decrease in supply level. The weekly fall could be attributed to lower production and imports. At 133.1 million barrels, current supplies are 15.4% below the year-ago level and are in the lower half of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 2% from the prior week to 90%.

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) , and refiners such as Valero Energy (NYSE:VLO) , Phillips 66 (NYSE:PSX) and Marathon Petroleum (NYSE:MPC) .

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