U.S. Oil Futures Rise After 3rd Weekly Drop In Stockpiles

Oil prices rose on Wednesday after heavy losses in the previous session that came as expectations of moderating global demand offset the OPEC producer cartel’s extension of their existing output cuts up to March 2020. The U.S. benchmark crude futures were up $1.09, or 1.9%, at $57.34 a barrel, following a decline of nearly 5% on Tuesday. Oil prices edged up after the Energy Department's inventory release showed that U.S. commercial crude supplies fell for a third week running.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.1 million barrels for the week ending Jun 28, after a hefty decline of nearly 13 million barrels in the previous week. The analysts had expected crude stocks to go down some 3.7 million barrels. Strong refiner demand led to the stockpile draw with the world's biggest oil consumer even as the magnitude was far less than what energy analysts had expected due to sharply higher imports, which rose by 929,000 barrels per day.

The past week’s decline in oil inventories was the third in a row and comes as a relief for industry watchers, who saw supplies trend mostly higher since mid-March. In fact, prior to these decreases, stockpiles expanded in 9 out of 13 weeks and were up nearly 43 million barrels (or 10%) during the period. Consequently, despite the latest draw in U.S. oil inventories, at 468.5 million barrels, current supplies remain 12.1% above the year-ago figure and 5% over the five-year average.

Further, the EIA report showed a stock buildup at the Cushing terminal in Oklahoma. Supplies at the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange was up 652,000 barrels to 52.5 million barrels.

The crude supply cover was down from 27.4 days in the previous week to 27.2 days. In the year-ago period, the supply cover was 23.7 days.

Gasoline: Gasoline supplies fell 1.6 million barrels for its third successive weekly decline. The drop – below the polled number of 2.4 million barrels – came on account of strengthening demand and lower production of the fuel. At 230.6 million barrels, the stock of the most widely used petroleum product is now 3.8% below the year-earlier level and at the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose 1.4 million barrels last week on softer demand, while analysts were looking for an inventory drop of similar size. Current supplies – at 126.8 million barrels – are 7.8% higher than the year-ago level though stocks remain 6% below than the five-year average.

Refinery Rates: Refinery utilization remained unchanged from the prior week at 94.2%.

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

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