US oil prices closed higher after a weekly report from the Energy Information Administration (“EIA”) showed another large inventory run. The seventh consecutive decline in domestic oil inventories was accompanied by a decline in gasoline inventories. However, the commodity detracted from some of its gains due to the uncertainties arising from the stalled OPEC + meeting held up by differences between the UAE and Saudi Arabia.
On the New York Mercantile Exchange, WTI crude oil futures rose 74 cents, or 1%, to $ 72.94 a barrel.
Below we review the EIA’s weekly petroleum status report for the week ending July 2nd.
Analysis of the latest EIA report
Crude oil: The federal government’s EIA report found that crude oil inventories were down 6.9 million barrels, compared to expectations of a 6.2 million barrels decline, according to analysts polled by S&P Global Platts. An increase in demand (or total products shipped) combined with lower imports were responsible for the unexpectedly high inventory levels at the world’s largest oil consumer. This brings total domestic inventories to 445.5 million barrels – 17.4% less than last year and 7% less than the five-year average.
The latest report also showed that shipments at the Cushing Terminal (the main delivery hub for US crude oil futures traded on the New York Mercantile Exchange) fell 614,000 barrels to 39.6 million barrels.
Meanwhile, crude oil supply coverage fell from 28 days in the previous week to 27.5 days. In the same period of the previous year, the coverage was 38.6 days.
Now we come to the products.
Petrol: Gasoline supplies went down for the second time in three weeks. The decrease of 6.1 million barrels is due to increased demand despite increasing production. Analysts had forecast that gasoline stocks would decrease by 1.7 million barrels. At 235.5 million barrels, the current inventory of the most widely used mineral oil product is 6.4% below the previous year’s level and 2% below the five-year average.
Distillate: Distillate fuel shipments (including diesel and heating oil) rose 1.6 million barrels, reflecting a decline in demand. Meanwhile, the market was expecting supply to grow by 1.4 million barrels. Despite the expansion, current stocks of 138.7 million barrels are 21.8% below the previous year’s level and 6% below the five-year average.
Refinery prices: The refinery utilization rate was 92.2%, 0.7% below the previous week.
While the OPEC + fiasco has raised many questions about the future path of oil, oil traders currently remain very optimistic about the commodity. Prices stabilized on Thursday as investors focus on improving energy market fundamentals. Crude oil shipments fell to pre-lockdown levels, with US commercial inventories down more than 11% since mid-March. If you take Cushing as an indicator, the oil market has already picked up significantly. Inventories at the important warehouse hub fell below 40 million barrels last week, the lowest level since March 2020. Gasoline demand also improved due to the recovery in road and air traffic. This bodes well for oil prices in the second half of 2021.
With all the tailwind, the Zacks Oil / Energy sector outperformed the S&P 500 index well. It’s up 23.3% so far this year, compared to the S&P 500’s 16.8% appreciation. As a result, five of the top 10 S&P 500 winners this year include energy-related names such as Marathon oil MRO, Diamondback energy CATCH, Devonian energy DVN, Occidental Petroleum OXY and EOG resources EOG.
Marathon, with a Zacks rank of # 2 (Buy), is the top performing energy stock up 94.15%, followed by Diamondback (82.21%), Devon (78.35%), Occidental (71.35 %) and EOG (60.20.). %).
You can see the full list of current Zacks # 1 Rank stocks here.
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