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Crude Price Falls on Surprise Build in U.S. Inventories

Nilanjan Choudhury

U.S. crude futures lost 48 cents, or 0.8%, to settle at $58.76 a barrel on Wednesday after a data report showed an unexpected rise in oil inventories, accompanied by a steep increase in gasoline and distillate supplies.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Dec 6.

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 822,000 barrels, compared to the 1.8 million barrels decrease that energy analysts had expected. A combination of surging imports and lower refinery runs largely drove the surprise stockpile build with the world's biggest oil consumer even as U.S. production dropped from record levels. This puts the total domestic stocks at 447.9 million barrels – 1.3% above the year-ago figure and 4% higher than the five-year average.

Meanwhile, the oil market drew some support from a large stockpile draw at the Cushing terminal in Oklahoma. The key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange saw inventories fall 3.4 million barrels to 40.4 million barrels.

The crude supply cover was down from 27.3 days in the previous week to 27.1 days. In the year-ago period, the supply cover was 25.5 days.

Turning to products, and it is a fairly bearish story as well.

Gasoline: Gasoline supplies increased for the fifth straight week. The fuel’s 5.4 million barrels jump is attributable to subdued demand. Analysts had forecast 3.3 million barrels climb. At 234.8 million barrels, the current stock of the most widely used petroleum product is 2.8% above the year-earlier level and exceeds the five-year average range by 5%.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up for the third time in 12 weeks. The 4.1 million barrels increase was significantly higher than the supply climb of 2 million barrels that analysts were looking for. Current supplies – at 123.6 million barrels – are marginally lower than the year-ago level and remain 9% below the five-year average.

Refinery Rates: Refinery utilization was down 1.3% from the prior week to 90.6%.

About the Weekly Petroleum Status Report

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.

The data from EIA generally acts as a catalyst for crude prices and affect producers, such as ExxonMobil XOM, Chevron CVX and ConocoPhillips COP and refiners such as Valero Energy VLO and Marathon Petroleum MPC.

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