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Crude Prices Hit 1-Month High on Sizeable Supply Drawdown

With WTI settling at a four-week high, the likes of Earthstone Energy (ESTE), Canadian Natural Resources (CNQ), Occidental Energy (OXY) and PDC Energy (PDCE) should notch up healthy share gains.

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This story originally appeared on Zacks

U.S. oil prices moved higher on Dec 22 as a large fall in domestic stocks outweighed the build-up in fuel inventories. A weekly report from the Energy Information Administration ("EIA") showed the fourth straight drawdown in crude supplies. Easing concerns about the potential Omicron-related fall in demand also boosted the commodity.

On the New York Mercantile Exchange, WTI crude futures gained $1.64, or 2.3%, to settle at $72.76 a barrel.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Dec 17.

- Zacks

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 4.7 million barrels compared to expectations of a 3.9 million-barrel decrease per the analysts surveyed by S&P Global Platts. The combination of a pullback in imports, a drop in domestic production and higher refinery demand accounted for the larger-than-expected stockpile draw with the world’s biggest oil consumer. Total domestic stocks now stand at 423.6 million barrels — 15.2% less than the year-ago figure and 8% lower than the five-year average.

On a somewhat bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) increased 1.5 million barrels to 33.7 million barrels.

Meanwhile, the crude supply cover was down from 27.3 days in the previous week to 26.9 days. In the year-ago period, the supply cover was 35.3 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the third time in four weeks. The 5.5 million-barrel surge is attributable to sharply lower demand. Analysts had forecast that gasoline inventories would rise by 600,000 barrels. At 224.1 million barrels, the current stock of the most widely used petroleum product is 5.8% less than the year-earlier level and 4% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose last week after falling the week before. The 396,000-barrel increase primarily reflected faltering demand. Meanwhile, the market looked for a supply draw of 1.6 million barrels. Current inventories — at 124.2 million barrels — are 16.6% below the year-ago level and 8% lower than the five-year average.

Refinery Rates: Refinery utilization, at 89.6%, moved down 0.2% from the prior week.

Final Words

WTI settled at a nearly one-month high yesterday, following a sizeable dip in crude inventories. Despite some downside risk associated with the Omicron variant-induced demand concerns, the Oil/Energy market has undoubtedly bounced back from last year's pandemic-driven slump in consumption and prices.

Just recently, the four-week average for petroleum demand stood at an all-time high of 23.2 million barrels a day, indicating little reason for concern at this point. On the other hand, U.S. commercial stockpiles are down nearly 16% since mid-March. Further, it appears that fears of a slowdown in oil demand recovery from the Omicron variant are starting to subside, with the strain likely to be less deadly than expected. At the same time, available vaccines might be effective in neutralizing it.  

To take advantage of oil’s solid demand backdrop, 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.

Earthstone Energy ESTE: Earthstone has a projected earnings growth rate of 213% for the current year. The Zacks Consensus Estimate for ESTE’s current-year earnings has been revised 17.1% upward over the past 60 days.

Earthstone beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 93.2%. ESTE shares have gained around 81% in a year.

Canadian Natural Resources CNQ: Canadian Natural Resources has an expected earnings growth rate of 1,085.4% for the current year. The Zacks Consensus Estimate for CNQ's current-year earnings has been revised 10% upward over the last 60 days.

Canadian Natural Resources beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 67.4%, on average. CNQ has gained around 71.8% in a year.

Occidental Petroleum OXY: Occidental Energy has an expected earnings growth rate of 155.8% for the current year. The Zacks Consensus Estimate for Occidental Energy's current-year earnings has been revised 37.1% upward over the last 60 days.

Occidental Energy beat the Zacks Consensus Estimate for earnings in two of the last four quarters. OXY has a trailing four-quarter earnings surprise of roughly 13.7%, on average. The U.S. oil behemoth has rallied around 61.9% in a year.

PDC Energy PDCE: The company has a projected earnings growth rate of 286.2% for the current year. PDC Energy’s consensus estimate for the current year has been revised 20.4% upward over the past 60 days.

PDCE beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 51.1%. PDC Energy has rallied around 149.1% in a year.



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Occidental Petroleum Corporation (OXY): Free Stock Analysis Report

 

Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report

 

PDC Energy, Inc. (PDCE): Free Stock Analysis Report

 

Earthstone Energy, Inc. (ESTE): Free Stock Analysis Report

 

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