U.S. Crude Production at 18-Yr High

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles increased, as production climbed to its highest level in 18 years. The report further revealed that refined product inventories – gasoline and distillate – decreased from their previous week levels, as demand strengthened. Meanwhile, refiners scaled up their utilization rates by 0.6%.

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 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 1.09 million barrels for the week ending November 9, 2012, following a climb of 1.77 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 up some 1.5 million barrels. Continued spike in domestic production – now at their highest level since May 1994 – led to the 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 – edged up by 715,000 barrels from the previous week’s level to 43.68 million barrels. Stocks are currently just under the all-time high of 47.78 million barrels reached in June.

At 375.94 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 up from 25.4 days in the previous week to 25.5 days. In the year-ago period, the supply cover was 23.1 days.

Gasoline: Supplies of gasoline were down for the first time in 5 weeks, as domestic consumption jumped 7.2% to 8.91 million barrels a day.

The 440,000 barrels drop – compared to analyst projections for an unchanged supply level – took gasoline stockpiles down to 201.94 million barrels. As a result of this decrease, the existing inventory level of the most widely used petroleum product is now 1.6% off the year-earlier levels and is in the middle of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) dropped by 2.54 million barrels last week, much higher than analysts' expectations for a 500,000 barrels decrease in inventory level. The sharp decline in distillate fuel stocks – the eighth in 9 weeks – could be attributed to stronger demand, partially offset by higher imports.

At 115.52 million barrels, distillate supplies are 13.6% 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 up 0.6% from the prior week to 86.0%, in line with analysts' expectations.

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