Bullish signs in US oil demand as year-end approaches

US oil prices rose on December 29 after a weekly report from the Energy Information Administration (“EIA”) showed drawdowns in crude and fuel inventories. The easing of concerns about the potential drop in demand related to the Omicron also boosted the product.

On the New York Mercantile Exchange, WTI crude futures rose 58 cents, or 0.8%, to $ 76.56 per barrel, its highest level since Nov. 24. This puts the product on track for 58% gains in 2021, following last year’s destruction of demand. and falling prices.

Getting back to the shortened vacation week ending December 24, let’s take a look at the EIA’s weekly State of Oil report.

Analyze the latest EIA report

Crude oil: The federal government’s EIA report found that crude inventories fell 3.6 million barrels. A slight increase in exports and continued strength in refinery demand helped reduce inventories for the world’s largest oil consumer, even as US production increased. Total national stocks now stand at 420 million barrels, 14.9% lower than a year ago and 7% lower than the five-year average.

On a somewhat bearish note, the latest report showed supplies at the Cushing Terminal (the primary delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) increased by 1.1 million barrels. to 34.7 million barrels.

Meanwhile, crude supply coverage fell from 26.9 days the previous week to 26.7 days. During the period last year, supply coverage was 34.7 days.

Now let’s move on to the products.

Gasoline: Gasoline supplies fell for the second time in three weeks. The drop of 1.5 million barrels was attributable to sharply rising demand. At 222.7 million barrels, the current inventory of the most widely used petroleum product is 5.9% below the previous year’s level and 6% below the five-year average range.

Distillate: Supplies of distillate fuels (including diesel and heating oil) fell last week after climbing the week before. The decline of 1.7 million barrels mainly reflects higher demand. Current stocks – at 122.4 million barrels – are 19.5% below their level a year ago and 14% below the five-year average.

Refinery prices: Refinery utilization, at 89.7%, increased 0.1% from the previous week.

Final words

WTI stabilized at a five-week high yesterday after a significant drop in crude, gasoline and distillate inventories. Despite a certain downside risk associated with the demand problems induced by the Omicron variant, the Oil / Energy The market has undoubtedly rebounded from the drop in consumption and prices due to last year’s pandemic.

Just recently, the four-week average oil demand stood at an all-time high of 23.2 million barrels per day, indicating little cause for concern at this point. In contrast, US commercial inventories have fallen more than 16% since mid-March. In addition, it appears that fears of a slowing recovery in demand for oil from the Omicron variant are starting to fade, with the pressure likely to be less deadly than expected. At the same time, the available vaccines could be effective in neutralizing it.

To take advantage of the strong backdrop of oil demand as the New Year dawns, one could build a position by tapping into the Zacks Rank # 1 (Strong Buy) oil companies mentioned below.

You can see The full list of today’s Zacks # 1 Rank stocks here.

Earth Stone Energy ESTE: Earthstone has a projected earnings growth rate of 112.2% for next year. Zacks’ consensus estimate for ESTE’s earnings in 2022 has been revised up 24.4% in the past 60 days.

Earthstone has beaten Zacks’ consensus estimate for earnings in each of the past four quarters, averaging 93.2%. ESTE shares have gained around 129.1% in one year.

Canadian natural resources CNQ: Canadian Natural Resources predicts an 11.1% profit growth rate for next year. Zacks’ consensus estimate for CNQ earnings in 2022 has been revised 9.1% up in the past 60 days.

Canadian Natural Resources has beaten Zacks’ consensus estimate for earnings in each of the past four quarters. It has a surprise profit over the last four quarters of around 67.4% on average. CNQ has gained about 80% in one year.

PDC Energy PDCE: The company has a projected profit growth rate of 29.2% for next year. PDC Energy’s consensus estimate for 2022 has been revised up 18.3% in the past 60 days.

PDCE beat Zacks’ consensus estimate for earnings in each of the past four quarters, averaging 51.1%. PDC Energy grew about 153.9% in one year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Steve R. Hansen