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Oil Prices Little Changed Post Mixed EIA Inventory Data

A supportive macro backdrop and robust fundamentals should help the likes of ConocoPhillips (COP), EOG Resources (EOG), Suncor Energy (SU) and Diamondback Energy (FANG) notch up further share gains.

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This story originally appeared on Zacks

U.S. crude prices barely budged on Wednesday despite a weekly report from the Energy Information Administration ("EIA") showing draws in fuel stockpiles as rising oil supplies blunted the impact. Moreover, energy traders largely stuck to the sidelines, awaiting next week’s OPEC+ ministerial meeting and the carte’s response to some major economies (led by America) releasing crude stockpiles in a coordinated effort to lower fuel prices.

On the New York Mercantile Exchange, WTI crude futures lost 11 cents, or 0.1%, to settle at $78.39 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Nov 19.

- Zacks

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 1 million barrels as opposed to expectations of a 1.3-million-barrel decrease per the analysts surveyed by S&P Global Platts. The combination of dive in exports, higher imports and a recovery in production accounted for the surprise stockpile build with the world’s biggest oil consumer even as refinery activity improved. This put the total domestic stocks at 434 million barrels — 11.2% less than the year-ago figure and 7% lower than the five-year average.

The latest report also 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 787,000 barrels to 27.4 million barrels.

Meanwhile, the crude supply cover was down from 28.5 days in the previous week to 28.3 days. In the year-ago period, the supply cover was 35.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the seventh week in a row. The 603,000-barrel drop is attributable to lower imports and continued strength in demand. Analysts had forecast that gasoline inventories would remain flat. At 211.4 million barrels, the current stock of the most widely used petroleum product is 8.1% less than the year-earlier level and 6% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell for the third week in succession. The 2 million barrel decrease primarily reflected higher demand. Meanwhile, the market looked for a supply decline of 900,000 barrels. Current inventories — at 121.7 million barrels — are 14.7% below the year-ago level and 8% lower than the five-year average.

Refinery Rates: Refinery utilization, at 88.6%, moved up 0.7% from the prior week.

Final Words

WTI changed hands broadly flat yesterday as the fall in product inventories was insufficient to offset a surprise crude build and traders’ cautiousness ahead of the OPEC+ meeting.

But the overall Oil/Energy market is well-positioned with a supportive macro backdrop and robust fundamentals. Widespread COVID-19 vaccine rollouts, the ongoing government stimulus and the OPEC+ cartel’s calibrated production policy have contributed to this positive setup. Even talks of an emergency drawdown of oil from the U.S. Strategic Petroleum Reserve (“SPR”) jointly with other major consumers, including India, China, Japan and South Korea, seem to be undermined by the market.

Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down some 14% since mid-March. Taking Cushing as an indicator, the oil market has already tightened considerably. Stocks fell to 26.4 million barrels at the key storage hub earlier this month, the lowest in more than three years. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel. In fact, strong consumption of gasoline has pushed inventories to the lowest level in four years.

To take advantage of oil’s robust outlook, one might build a position by tapping into the below-mentioned Zacks Rank #1 (Strong Buy) oil companies.

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

ConocoPhillips COP: The company has a projected earnings growth rate of 710.3% for the current year. The Zacks Consensus Estimate for ConocoPhillips’ current-year earnings has been revised 21.8% upward over the last 60 days.

ConocoPhillips beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 13%. COP shares have gained around 77% in a year.

EOG Resources EOG: The company has a projected earnings growth rate of 495.9% for the current year. EOG Resources’ consensus estimate for the current year has been revised 16.5% upward over the last 60 days.

The oil and gas finder beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 29.8%. EOG has rallied around 81.8% in a year.

Suncor Energy SU: The company has an expected earnings growth rate of 318.2% for the current year. The Zacks Consensus Estimate for Suncor Energy's current-year earnings has been revised 27% upward over the last 60 days.

Suncor Energy beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice. SU has a trailing four-quarter earnings surprise of roughly 7.5%, on average. The Canadian oil behemoth has rallied around 54.5% in a year.

Diamondback Energy FANG: The company has a projected earnings growth rate of 267.4% for the current year. Diamondback Energy’s consensus estimate for the current year has been revised 10.6% upward over the last 60 days.

FANG beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 11.7%. Diamondback Energy has rallied around 156.8% in a year.



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