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Inventory Drawdown on All Fronts Leads to Higher Oil Prices

U.S. oil prices advanced on Thursday to a seven-week high after a weekly report from the Energy Information Administration ("EIA") showed drawdowns in crude and fuel stockpiles.

On the New York Mercantile Exchange, WTI crude futures gained 68 cents (or 0.8%) to close at $82.25 a barrel yesterday — the highest since Apr 30.

We believe that oil’s current levels of just above $80 allow long-term-oriented market participants to buy shares in quality companies at attractive prices. Investors interested in the sector could benefit from having top-ranked stocks like Sunoco LP SUN, ProPetro Holding PUMP and Tullow Oil TUWOY in their portfolios.

Let's dig deep into EIA’s Weekly Petroleum Status Report for the week ending Jun 14.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 2.5 million barrels compared to analysts’ expectations of a 4.1-million-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The stockpile decline in the world’s biggest oil consumer was largely thanks to the jump in exports, which more than offset a dip in refinery demand.

Total domestic stock now stands at 457.1 million barrels, 1.3% lower than the year-ago figure of 463.3 million barrels and 4% less than the five-year average.

However, on a slightly bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) rose 307,000 barrels to 34.1 million barrels.

Meanwhile, the crude supply cover dropped from 27.1 days in the previous week to 26.9 days. In the year-ago period, the supply cover was 28.1 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the first time in four weeks. The 2.3-million-barrel drop was primarily attributable to a jump in demand that reached a new 2024 high. Analysts had forecast that gasoline inventories would rise 610,000 barrels. At 231.2 million barrels, the current stock of the most widely used petroleum product is 4.4% more than the year-earlier level, while it is 1% lower than the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell after a four-week climb. The 1.7-million-barrel drop again reflected an uptick in demand. Meanwhile, the market looked for a supply addition of 280,000 barrels. Despite last week’s decrease, current inventories — at 121.6 million barrels — are 6.4% above the year-ago level but 8% lower than the five-year average.

Refinery Rates: Refinery utilization, at 93.5%, fell 1.5% from the prior week.

3 Energy Stocks to Buy

Having reviewed the Weekly Petroleum Status Report, investors interested in the energy sector might consider operators like Sunoco LP, ProPetro Holding and Tullow Oil. Sunoco currently sports a Zacks Rank #1 (Strong Buy), while ProPetro and Tullow carry a Zacks Rank #2 (Buy) each.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco LP: The Zacks Consensus Estimate for 2024 earnings of Sunoco indicates 99.7% growth.

SUN is valued at around $5.5 billion. Sunoco has seen its stock rise 36.2% in a year.

ProPetro Holding: Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has increased by 36.7%.

ProPetro Holding is valued at around $886.6 million. PUMP has seen its stock rise 10% in a year.

Tullow Oil: TUWOY is valued at some $568.4 million. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has increased 20%.

Tullow Oil enjoys a Value, Growth and Momentum Score of A, B and A, respectively, each helping it round out with a VGM Score of A. TUWOY shares have gained 29.2% in a year.

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