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Oil Climbs Above $75 as Winter Shut-Ins Lead to Big Stock Draw

U.S. oil prices finished up on Thursday after a weekly report from the Energy Information Administration ("EIA") showed shrinking supplies amid cold weather and extreme climate conditions. Geopolitical tensions and China’s ramped-up efforts to revive its economy further supported the commodity.

On the New York Mercantile Exchange, WTI crude futures gained 72 cents (or 1%), to close at $75.09 a barrel yesterday.

We believe that oil’s current levels of around $75 allow long-term-oriented market participants to buy shares in quality companies at attractive prices. Investors interested in the sector could benefit from having quality stocks like Oceaneering International OII, Helix Energy Solutions Group HLX and Sunoco LP SUN in their portfolios.

Let's dig deep into EIA’s Weekly Petroleum Status Report for the week ending Jan 19.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 9.2 million barrels compared to analyst expectations of a 3 million-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The big stockpile decline with the world’s biggest oil consumer was largely thanks to the slump in imports and production from the winter storm-led shut-ins.

Total domestic stock now stands at 420.7 million barrels — 6.2% lower than the year-ago figure of 448.5 million barrels and 5% less 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) fell 2 million barrels to 30.1 million barrels.

Meanwhile, the crude supply cover decreased from 25.9 days in the previous week to 25.8 days. In the year-ago period, the supply cover was 30.8 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the ninth time in 10 weeks. The 4.9-million-barrel jump was primarily attributable to a pullback in demand as inclement weather kept motorists off the road. Analysts had forecast that gasoline inventories would gain 1 million barrels. At 253 million barrels, the current stock of the most widely used petroleum product is 9.1% more than the year-earlier level, while it is 1% higher than the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell for the first time in nine weeks. The 1.4-million-barrel drop mainly reflected a pullback in production and higher demand. Meanwhile, the market looked for a supply draw of 81,000 barrels. Despite last week’s decrease, current inventories — at 133.3 million barrels — are 15.6% above the year-ago level, though it is 4% lower than the five-year average.

Refinery Rates: Refinery utilization, at 85.8%, fell 6.8% from the prior week as many units had to reduce runs and halt operations due to weather-related outages.

3 Energy Stocks to Buy

Having gone through the Weekly Petroleum Status Report, investors interested in the energy sector might look at operators like Oceaneering International, Sunoco LP and Helix Energy Solutions Group. OII and SUN currently carry a Zacks Rank #1 (Strong Buy) each, while HLX is a Zacks Rank #2 (Buy) stock.

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

Oceaneering International: The 2023 Zacks Consensus Estimate for OII indicates 177.4% year-over-year earnings per share growth.

Oceaneering is valued at around $2.1 billion. OII has seen its shares rise 5.4% in a year.

Sunoco LP: The 2023 Zacks Consensus Estimate for SUN indicates 30.3% year-over-year earnings per unit growth.

Sunoco is valued at around $5.6 billion. SUN has seen its units rise 18.8% in a year.

Helix Energy Solutions Group: The 2023 Zacks Consensus Estimate for HLX indicates 143.8% year-over-year earnings per share growth.

Helix Energy Solutions is valued at around $1.5 billion. HLX has seen its shares rise 25.5% in a year.

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