The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged a larger-than-expected decline. The report further revealed that within the ‘refined products’ category, gasoline stocks plunged, while distillate supplies were up from the week-ago level. Meanwhile, refiners unexpectedly scaled up their utilization rates by 1.6%.
Despite the supportive crude data from the U.S. government and the ongoing unrest in Egypt that could destabilize the resource-rich Middle East and further tighten the global supply picture, the commodity’s price retreated back below $104 a barrel. This was mainly on account of the minutes from the Federal Reserve’s July meeting that suggested that the U.S. may taper its monetary stimulus later this year.
Traders have voiced concerns that Fed’s shift away from the bond buying policy may lead to dollar-denominated oil prices to increase in local-currency terms in emerging markets, thus slowing growth.
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.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.43 million barrels for the week ending Aug 16, 2013, following a decrease of 2.81 million barrels in the previous week.
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 – were down 1.09 million barrels from the previous week’s level to 37.43 million barrels. Stocks are currently at their lowest since Mar last year and 27.8% under the all-time high of 51.86 million barrels reached in Jan.
As a result of the seventh weekly inventory decline in 8 weeks, at 359.06 million barrels, current crude supplies are at their lowest level since Aug. 31, last year. It is now down slightly (by 0.4%) from the year-ago period, though it is still close to the upper limit of the average for this time of the year. The crude supply cover remained at 22.7 days – same as in the previous week. In the year-ago period, the supply cover was 23.2 days.
Gasoline: Supplies of gasoline were down for the second time in as many weeks, as domestic consumption strengthened and imports dropped. This was partially offset by rise in production.
The 4.03 million barrels withdrawal – comfortably outpacing analysts’ projections for a 1.5 million-barrels decrease in supply level – took gasoline stockpiles down to 218.40 million barrels. Notwithstanding this drawdown, the existing inventory level of the most widely used petroleum product is 7.7% higher than the year-earlier level and is in the top half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 871,000 barrels last week, just short of analysts’ expectations for a 1 million barrels rise in inventory level. The increase in distillate fuel stocks – the third in as many weeks – could be attributed to higher imports and production.
At 129.35 million barrels, distillate supplies are 3.4% above the year-ago level but is close to the lower limit of the average range for this time of the year.
Refinery Rates: Refinery utilization edged up 1.6% from the prior week to 91.0%. The analysts were expecting the refinery run rate to decrease 0.5% to 88.9%.
Stocks to Consider
Despite concerns, with spot crude price staying strong – at around $104 a barrel – brokerage analysts are likely to upgrade their forecasts on oil-weighted companies and related support plays, leading to positive estimate revisions.
Moreover, a price-to-book (P/B) ratio of just 2.5 suggests that the stock is still undervalued. In fact, shares of Matador Resources have risen from $12.78 to $17.29 since we recommended it on Crude Prices Surge: 3 Stocks to Buy Now on Jul 22.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
