Oil Spikes on Bullish Storage Data, Output Freeze Hopes

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The U.S. Energy Department’s weekly inventory release showed that crude stockpiles recorded a big drop. The report further revealed that gasoline inventories fell from its previous week level, while distillate stocks rose unexpectedly.

The bullish sentiment on the back of drawdown in U.S. crude and gasoline stocks lifted oil above $48-a-barrel. Expectations of a production freeze from the 14-member OPEC bloc and Russia also played its part in the commodity’s rally.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories decreased by 2.51 million barrels for the week ending Aug 12, 2016, following a rise of 1.06 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 200,000 barrels. An uptick in refinery demand and lower imports led to the big stockpile drawdown with the world’s biggest oil consumer even as production rose.

In particular, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 724,000 barrels from previous week’s level to 64.53 million barrels.

Despite the inventory decline, U.S. remains awash with excess oil. At 521.09 million barrels, current crude supplies are up 14% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover was down slightly – from 31.3 days in the previous week to 31.2 days. In the year-ago period, the supply cover was 27.0 days.

Oils-Energy Sector Price Index

 

Oils-Energy Sector Price Index

Gasoline: Supplies of gasoline were down for the third successive week as imports fell. The 2.72 million barrels draw – comfortably exceeding the analysts’ polled number of 1.8 million barrels decrease in supply level – took gasoline stockpiles down to 232.66 million barrels. Despite last week’s decline, the existing stock of the most widely used petroleum product is 9% higher than the year-earlier level and is comfortably above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went up by 1.94 million barrels last week, as opposed to analysts’ expectations for an 500,000 barrels drop in inventory level. The increase in distillate fuel stocks – for the second time in 3 weeks – could be attributed to higher production and weakening demand. At 153.14 million barrels, distillate supplies are 3% higher than the year-ago level and are near the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 1.3% from the prior week to 93.5%.

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, and refiners such as Valero Energy Corp. VLO, Phillips 66 PSX and HollyFrontier Corp. HFC.

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