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EIA Reports a Sixth-Straight Weekly Drop in Crude Supplies


The U.S. Energy Department's inventory release showed that crude stockpiles recorded a sharp decline for the sixth week in a row on record high refinery runs. With oil supplies continuing to fall, investor sentiment has turned slightly positive on dissipating fears about a meltdown to sub-$40 levels. Analysts also believe that the trend, if sustained, could help tighten the market significantly.

However, gains were capped by a strong dollar and escalating tensions between the US and North Korea that sparked investor movement away from riskier assets to safe havens like gold. As a result, West Texas Intermediate (WTI) crude futures added 0.8% (or 39 cents) to $49.56 per barrel Wednesday.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 6.45 million barrels for the week ending August 4, 2017, following a decline of 1.53 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 down some 2.5 million barrels. A surge in refinery crude runs to 12-year highs and dip in imports as well as domestic production led to the large stockpile draw with the world's biggest oil consume.

The sixteenth inventory reduction in 18 weeks has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. Nevertheless, U.S. still remains awash with excess oil. At 475.44 million barrels, current crude supplies are in the upper half of the average range during this time of the year.

After declining in 15 of the last 16 weeks, 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 569,000 barrels from previous week’s level to 56.37 million barrels.

The crude supply cover was down from 27.9 days in the previous week to 27.4 days. In the year-ago period, the supply cover was 31.3 days.

Gasoline: Supplies of gasoline were up for the first time in 8 weeks as demand weakened in the face of increasing imports and production. The 3.42 million barrels addition – contrary to the polled number of 1.25 million barrels fall in supply level – took gasoline stockpiles up to 231.10 million barrels. Despite last week’s increase, the existing stock of the most widely used petroleum product remains 1.8% below the year-earlier level but is in the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 1.73 million barrels last week, well ahead of analysts’ expectations for 600,000 barrels decrease in supply level. The fourth successive weekly fall could be attributed to strong demand and lower imports. At 147.69 million barrels, current supplies are 2.3% below the year-ago level but are in the upper limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 0.9% from the prior week to 96.3%.

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 Corp. XOM, Chevron Corp. CVX and ConocoPhillips COP, and refiners such as Valero Energy Corp. VLO, Phillips 66 PSX and Marathon Petroleum Corp. MPC. Each of these firms has a Zacks Rank #3 (Hold).

Stock to Buy

In case you are looking for energy names for your portfolio, one could opt for Range Resources Corp. RRC. It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of oil and gas properties primarily in the southwestern, Appalachian and Gulf Coast regions of the U.S. The 2017 Zacks Consensus Estimate for this company is 49 cents, representing some 117.7% earnings per share growth over 2016. Next year’s average forecast is 92 cents, pointing to another 89% growth. Range Resources has a VGM Score of “B”.

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