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Crude Prices Hold Steady After Mixed EIA Inventory Data

Nilanjan Choudhury

Oil prices were little changed at $52.59 a barrel on Wednesday as investors weighed positive signs in the U.S.-China trade talks and drop in product inventories against fears over global economic growth and a larger-than-expected build in crude stockpiles.

In particular, the U.S. Energy Department's inventory release showed that crude stocks recorded a weekly increase that was larger than anticipated. On a bullish note though, the report revealed that refined product inventories – gasoline and distillate – both fell from their previous week levels.

Below we review the EIA's Weekly Petroleum Status Report for the week ending Oct 4.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 2.9 million barrels, compared to the 2.4 million barrels increase that energy analysts had expected. Seasonal maintenance, which kept refining rates low last week, largely drove the bigger-than-anticipated stockpile build with the world's biggest oil consumer. This puts the total domestic stocks at 425.6 million barrels – 3.8% above the year-ago figure and essentially at their five-year average.

Oil in storage in the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) increased as well, rising by 941,000 barrels.

The crude supply cover was up from 25.3 days in the previous week to 26.2 days. In the year-ago period, the supply cover was 24.6 days.

Turning to products, and it is a fairly positive story.

Gasoline: Gasoline supplies fell 1.2 million barrels – matching analyst forecast – as demand for the fuel increased by 323,000 barrels per day to 9.5 million barrels per day. At 228.8 million barrels, the current stock of the most widely used petroleum product is 3.1% below the year-earlier level but exceeds the five-year average range by 2%.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 3.9 million barrels last week on higher demand, while analysts were looking for an inventory draw of 2.5 million barrels. Current supplies – at 127.3 million barrels – are 4.6% lower than the year-ago level and remain 9% below than the five-year average.

Refinery Rates: Refinery utilization was down 0.7% from the prior week to 85.7%, the lowest level since February.

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, Phillips 66 PSX and Marathon Petroleum MPC.

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