The U.S. Energy Department’s weekly inventory release showed a steep build-up in crude stockpiles with supplies at the key delivery hub of Cushing hitting a record high for the second time in a row. The agency’s report further added that fuel inventories were off from the previous week levels, while refinery run-rates increased.
The Energy Information Administration (“EIA”) Petroleum Status Report – which contains data for the previous week ending on 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 businesses of companies engaged in oil and refining industry, such as ExxonMobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero (VLO) and Tesoro (TSO).
Crude Oil
The federal government’s EIA report revealed that crude inventories rose by 2.52 million barrels for the week ending March 4, 2011, against expectation of a smaller gain set by analysts who had been surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. (MHP). Rising imports led to the stockpile build with the world’s biggest oil user, more than nullifying the effects of improved refinery operations.
The increase in oil stocks – the seventh gain in 8 weeks – follows a 6-week trend of steady decline in supplies, which slid by more than 26.5 million barrels during the period, fueled by cold weather conditions and the year-end tax-related inventory adjustments.
At 348.9 million barrels, current crude supplies are 1.7% above the year-earlier level and are above the upper limit of the average for this time of the year. The crude supply cover was up from 24.9 days in the previous week to 25.3 days. In the year-ago period, the supply cover was 24.6 days.
In particular, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures – rose 1.69 million barrels in the latest week to hit a new all-time high of 40.26 million barrels.
As a result of the continued glut in the domestic oil stocks and concerns that the violence in Libya will boil over to other oil rich nations in the Middle East and lead to a supply shortfall, crude prices are currently trending at around $105 a barrel.
Gasoline
Supplies of gasoline fell for the third successive week, as demand edged up by 30 thousand barrels per day, import levels dropped by 47 thousand barrels per day, and production decreased by 200 thousand barrels per day.
The 5.49 million barrel drop – far above analyst projections – took gasoline stockpiles to 229.2 million barrels, down from a 20-year high of 241.1 million barrels reached in February. Current inventory levels are almost flat with year-earlier levels but are above the upper half of the average range.
Distillate
Distillate fuel inventories (including diesel and heating oil) were down by 3.98 million barrels last week, well ahead of analyst expectations. The decrease in distillate fuel supplies can be attributed to surging demand (by 509 thousand barrels per day) and lower production (by 34 thousand barrels per day), partly offset by a rise in imports (by 82 thousand barrels per day).
At 155.2 million barrels, distillate supplies were 3.7% more than the year-ago level and also above the upper boundary of the average range for this time of the year.
Refinery Rates
Refinery utilization was up 1.1% from the prior week to 82.0%. Analysts were expecting the refinery run rate to increase 0.6% to 81.5%.
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