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A Look Into EIA's Latest Weekly Crude Inventory Report

Oil prices are supported by improving fundamentals, which has helped the likes of Devon Energy (DVN), EOG Resources (EOG), Diamondback Energy (FANG),...

This story originally appeared on Zacks

U.S. oil prices edged higher on Wednesday, underpinned by a weekly report from the Energy Information Administration ("EIA") that showed a stockpile draw. The fourth straight fall in domestic oil stocks was accompanied by a decrease in distillate inventories. However, the commodity pared back most of its gains after gasoline supplies logged a surprise increase.

On the New York Mercantile Exchange, WTI crude futures inched up 9 cents or 0.1%, to settle at $68.59 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Aug 27.

- Zacks

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 7.2 million barrels compared to expectations of a 4.4-million-barrel decline per the analysts surveyed by S&P Global Platts. An uptick in total products supplied — the agency’s proxy for demand — to a new record coupled with higher exports accounted for the stockpile draw with the world’s biggest oil consumer even as production increased to its highest since May 2020. This puts total domestic stocks at 425.4 million barrels — 14.6% less than the year-ago figure and 6% lower than the five-year average.

On a somewhat bearish note, the report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) were up 836,000 barrels to 34.5 million barrels.

Meanwhile, the crude supply cover was down from 27 days in the previous week to 26.5 days. In the year-ago period, the supply cover was 34.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the second time in three weeks. The 1.3-million-barrel addition is attributable to a rise in imports that offset the slight increase in consumption and lower production. Analysts had forecast that gasoline inventories would fall by 1.8 million barrels. At 227.2 million barrels, the current stock of the most widely used petroleum product is 3.3% less than the year-earlier level and 2% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell last week after climbing the week before. The 1.7-million-barrel drop reflected strengthening demand and dip in production. Meanwhile, the market looked for a supply decline of 500,000 barrels. Current inventories — at 136.7 million barrels — are 23% below the year-ago level and 9% lower than the five-year average.

Refinery Rates: Refinery utilization, at 91.3%, was down 1.1% from the prior week.

Wrapping Up

Oil prices settled marginally higher yesterday, following a decline in crude and distillate inventories due to stronger consumption. Despite some disappointment with the latest gasoline number, the overall Oil/Energy market is surely on the mend with a supportive macro backdrop and robust fundamentals. Widespread COVID-19 vaccine rollouts, the ongoing government stimulus and OPEC+ supply curtailments have contributed to this positive setup.

Crude supplies are now at their lowest levels since September 2019, with U.S. commercial stockpiles down more than 15% since mid-March. There is also a marked improvement in gasoline demand on the back of rebounding road and airline travel. In fact, the last four-week average for petroleum demand is 21.4 million barrels a day, 17.1% above the year-ago levels. With all the tailwinds, the U.S. benchmark briefly hit a more than six-year high of $76.98 in July.

The Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen some 25.8% over the year-to-date period against a 21.8% gain for the broader S&P 500 benchmark. As far as companies within the index are concerned, shale stocks like Devon Energy DVN, EOG Resources EOG, Diamondback Energy FANG, Occidental Petroleum OXY and Marathon Oil MRO have done well so far this year.

Devon Energy, carrying a Zacks Rank #1 (Strong Buy), is the top-performing energy stock with a gain of 81.4%. Marathon, Diamondback, Occidental and EOG have also enjoyed outsized gains of 68.8%, 53.2%, 44.9% and 33.1%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Devon Energy Corporation (DVN): Free Stock Analysis Report


Marathon Oil Corporation (MRO): Free Stock Analysis Report


Occidental Petroleum Corporation (OXY): Free Stock Analysis Report


EOG Resources, Inc. (EOG): Free Stock Analysis Report


Diamondback Energy, Inc. (FANG): Free Stock Analysis Report


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