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U.S. Crude Jumps on Surprise Stock Draw Down

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a surprise fall from their all-time high levels. The report further revealed a healthy increase in refinery crude runs, indicating the likely conclusion to the seasonal maintenance period. Additional support came from remarks by Kuwait’s OPEC representative who said that major oil producers can agree on a production freeze regardless of Iran’s stance.

As a result, West Texas Intermediate (WTI) crude futures jumped 5.2% (or $1.86) to settle at $37.75 per barrel Wednesday.

This also prompted investors to increase their exposure to oil and related support plays. Market heavyweights like Marathon Oil Corp. MRO, Nabors Industries Ltd. NBR, Chevron Corp. CVX, Exxon Mobil Corp. XOM, Apache Corp. APA, Newfield Exploration Co. NFX and ConocoPhillips COP all experienced gains in yesterday’s trading.

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories decreased by 4.94 million barrels for the week ending Apr 1, 2016, following a rise of 2.30 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. – had expected crude stocks to go up by 2.9 million barrels. Improved refinery usage and lower production led to the surprise stockpile drawdown with the world's biggest oil consumer even.

However, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were up 357,000 barrels from the previous week’s level to 66.32 million barrels.

Despite the first inventory decline in 8 weeks, at 529.90 million barrels, current crude supplies are up 10% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover was down from 33.4 days in the previous week to 32.9 days. In the year-ago period, the supply cover was 30.8 days.

Gasoline: After declining for six consecutive weeks, supplies of gasoline went up. The 1.44 million-barrel surge – contrary to analysts’ polled number of 1.6 million barrels decrease in supply level – took gasoline stockpiles up to 244.0 million barrels. After last week’s build, the existing stock of the most widely used petroleum product is 6% higher than the year-earlier level and is comfortably above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose 1.8 million barrels last week, again defying analysts’ expectations for a 1 million barrels fall in inventory level. The increase in distillate fuel stocks – just the third in 7 weeks – took the tally to 162.98 million barrels. Supplies are 28% above the year-ago level and are above the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 1% from the prior week to 91.4%.

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.

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CHEVRON CORP (CVX): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
NABORS IND (NBR): Free Stock Analysis Report
APACHE CORP (APA): Free Stock Analysis Report
NEWFIELD EXPL (NFX): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis Report
MARATHON OIL CP (MRO): Free Stock Analysis Report
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