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Surprise Build in U.S. Crude Stocks

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged a surprise increase, as imports climbed and refinery demand weakened. The report further revealed that refined product inventories – gasoline and distillate – increased from their previous week levels.

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, such as ExxonMobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero Energy Corp. (VLO) and Tesoro Corp. (TSO).

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 843,000 barrels for the week ending December 7, 2012, following a drop of 2.36 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Companies Inc. (MHP), had expected oil stocks to go down some 2.5 million barrels. An uptick in the level of imports and a slight drop in refinery utilization rates led to the surprise stockpile build-up with the world's biggest oil consumer.

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 – jumped 1.19 million barrels from the previous week’s level to 46.82 million barrels. Stocks are currently just under the all-time high of 47.78 million barrels reached in June.

At 372.61 million barrels, current crude supplies are 11.5% above the year-earlier level, and comfortably exceed the upper limit of the average for this time of the year. The crude supply cover was down from 24.7 days in the previous week to 24.5 days. In the year-ago period, the supply cover was 22.6 days.

Gasoline: Supplies of gasoline were up for the third time in as many weeks despite improvement in domestic consumption and lower production. The increase in gasoline inventories could be attributed to rising imports.

The 5 million barrels jump – double the analysts’ projections for a 2.5 million barrels increase in supply level – took gasoline stockpiles up to 217.12 million barrels. However, notwithstanding this build, the existing inventory level of the most widely used petroleum product is still 0.8% off the year-earlier levels though it is in the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) gained 2.99 million barrels last week, much higher than analysts' expectations for a 1.25 million barrels increase in inventory level. The sharp rise in distillate fuel stocks – the second in 2 weeks – could be attributed to weaker demand and higher imports, partially offset by lower production.

At 118.06 million barrels, distillate supplies are 16.5% below the year-ago level and are well under the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.2% from the prior week to 90.4%.

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