Surprise Build in Crude Stocks - Analyst Blog

The U.S. Energy Department's weekly inventory release showed a surprise build in crude stockpiles. The agency's bearish report further added that gasoline and distillate supplies logged a broader-than-expected climb, while refinery run-rates decreased from the previous week.

The Energy Information Administration (“EIA”) Petroleum Status Report – which contains data for the previous week ending on 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 to understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect businesses of companies engaged in oil and refining industry, such as ExxonMobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero (VLO) and Tesoro (TSO).

Crude Oil

The federal government's EIA report revealed that crude inventories rose by 2.62 million barrels for the week ending January 14, 2011, against expectation of a drop set by analysts who had been surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. (MHP).

The increase in oil stocks snapped a 6-week trend of steady decline in supplies, which slid by more than 26.5 million barrels during the period, fueled by cold weather conditions and the year-end tax-related inventory adjustments. Rising imports and curtailed refinery operations led to the stockpile build in the world's biggest oil user – sending crude prices below $90 per barrel.

At 335.7 million barrels, crude supplies are 1.5% above the year-earlier level and are above the upper limit of the average for this time of the year. The crude supply cover was up from 22.4 days in the previous week to 22.8 days. In the year-ago period, the supply cover was 23.8 days.

Gasoline

Supplies of gasoline rose for the third straight week, as production spiked by 142 thousand barrels per day, while demand inched down to seasonal levels. The 4.44 million barrel jump – more than analyst projections – took  gasoline stockpiles to 227.7 million barrels. Current inventory levels are almost in line with year-earlier levels and are above the upper half of the average range.

Distillate

Distillate fuel inventories (including diesel and heating oil) were up by 1.04 million barrels last week, trumping forecasts for a smaller rise. The increase in distillate fuel supplies can be attributed to ultra-low sulfur diesel (ULSD) surpluses that more than offset the drop in production levels and imports.

At 165.8 million barrels, distillate supplies were 5.5% more than the year-ago level and also above the upper boundary of the average range for this time of the year.

Refinery Rates

Refinery utilization was down 3.4% from the prior week to 83.0%. Analysts were looking for the refinery run rate to decrease slightly less to 85.2%.

 
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