Another Drop in Crude Stockpiles - Analyst Blog

The U.S. Energy Department's weekly inventory release showed a larger-than-expected drop in crude and distillate stockpiles, while gasoline supplies continued with their climb. Meanwhile, refinery run-rates were down slightly from the previous week.

The Energy Information Administration (“EIA”) Petroleum Status Report – that 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 like ExxonMobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero (VLO) and Tesoro (TSO).

Crude Oil

The federal government's EIA reported that crude inventories fell by 5.33 million barrels for the week ending December 17, 2010, well above expectations by analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP). The decrease in oil stocks – the third in as many weeks – came even as imports increased and refineries operated at lower capacity. It can be attributed to cold weather conditions and year-end inventory adjustment decisions.

Stockpiles in the world's biggest oil user have fallen by more than 19 million barrels since November 26, sending crude prices to above $90 a barrel.

However, at 340.7 million barrels, crude supplies are 4.0% above the year-earlier level and remain above the upper limit of the average for this time of the year. The crude supply cover was down from 23.8 days in the previous week to 23.1 days. In the year-ago period, the supply cover was 23.7 days.

Gasoline

Supplies of gasoline rose for the fifth consecutive week, as imports and production rose, while demand slipped. The 2.40 million barrels jump – more than analyst projections – took the gasoline stockpiles to 217.2 million barrels. Current inventory levels are 0.4% above year-earlier levels and are on the upper half of the average range.

Distillate

Distillate fuel inventories (including diesel and heating oil) were down by 589 thousand barrels last week, trumping forecasts for a smaller drawdown. The decrease in distillate fuel supplies came as demand rose 278 thousand barrels per day, more than offsetting the rise in production levels. At 160.7 million barrels, distillate supplies were 0.4% less than the year-ago level but just above the upper boundary of the average range for this time of the year.

Refinery Rates

Refinery utilization was down 0.3% from the prior week to 87.7%. Analysts were looking for the refinery run rate to decrease slightly less to 87.85%.

 
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