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Oil Prices Rise on EIA Supply Data, IEA Demand Forecast

U.S. oil prices finished up on Thursday after a weekly report from the Energy Information Administration ("EIA") showed shrinking supplies. The strong demand growth forecast for 2024 by the International Energy Agency ("IEA") and rising Middle East tensions further supported the commodity.

On the New York Mercantile Exchange, WTI crude futures gained $1.52 (or 2.1%), to close at $74.08 a barrel yesterday.

We believe that oil’s current levels of under $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 12.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 2.5 million barrels compared to analyst expectations of a 93,000-barrel increase. The surprise stockpile decline with the world’s biggest oil consumer was largely thanks to a combination of stronger refiner demand and higher exports, which more than offset continued high domestic production, which at 13.3 million barrels per day, is at all-time highs.

Total domestic stock now stands at 429.9 million barrels — 4% lower than the year-ago figure of 448 million barrels and 3% less than the five-year average.

On a further bullish 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) fell 2.1 million barrels to 32.1 million barrels.

Meanwhile, the crude supply cover decreased from 26.1 days in the previous week to 25.9 days. In the year-ago period, the supply cover was 30.1 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the eighth time in nine weeks. The 3.1-million-barrel jump was primarily attributable to a pullback in demand and higher imports. Analysts had forecast that gasoline inventories would gain 3.6 million barrels. At 248.1 million barrels, the current stock of the most widely used petroleum product is 7.7% more than the year-earlier level, while it is slightly higher than the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the eighth time in as many weeks. The 2.4 million-barrel surge mainly reflected a drop in exports. Meanwhile, the market looked for a supply build of 1.9 million barrels. Following last week’s addition, current inventories — at 134.8 million barrels — are 16.4% above the year-ago level but 3% lower than the five-year average.

Refinery Rates: Refinery utilization, at 92.6%, fell 0.3% from the prior week.

3 Energy Stocks to Buy

Having gone through the Weekly Petroleum Status Report, investors interested in the energy space might consider the operators mentioned below. Each of these companies currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank 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 billion. OII has seen its shares rise 6.5% 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 $1.4 billion. HLX has seen its shares rise 24.7% 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 $6.1 billion. SUN has seen its units rise 32.4% in a year.

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