U.S. Oil Inventories Drop for Sixth Week, Fuel Supplies Rise – January 6, 2022
U.S. oil prices rose on January 5 as falling domestic inventories offset the build-up in fuel inventories. A weekly report from the Energy Information Administration (“EIA”) showed the sixth consecutive decline in crude supplies. Allaying concerns about the potential drop in demand linked to Omicron and the OPEC + cartel’s decision to stick to its planned easing of production cuts in February also boosted the product.
On the New York Mercantile Exchange, WTI crude futures contracts rose 86 cents, or 1.1%, to $ 77.85 per barrel, its highest level since Nov. 24.
Going back to the week ending December 31, 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 crude inventories fell 2.1 million barrels from expectations of a 4.4 million barrels drop according to analysts polled by S&P Global Platts. A decline in imports and continued strength in refinery demand led to the depletion of inventories for the world’s largest oil consumer, although declining exports and robust U.S. production limited l magnitude of the decline. Total national stocks now stand at 417.9 million barrels, 13.9% lower than a year ago and 8% 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 2.6 million barrels. to 37.3 million barrels.
Meanwhile, crude supply coverage fell from 26.7 days the previous week to 26.5 days. During the period last year, supply coverage was 34.2 days.
Now let’s move on to the products.
Gasoline: Gasoline supplies increased for the second time in three weeks. The 10.1 million barrels jump was the result of significantly weaker demand and higher imports. Analysts had forecast gasoline inventories to increase by 1.9 million barrels. At 232.8 million barrels, the current inventory of the most widely used petroleum product is 3.4% below the previous year’s level and 4% below the five-year average range.
Distillate: Supplies of distillate fuel (including diesel and heating oil) increased last week after falling the week before. The increase of 4.4 million barrels mainly reflects weak demand. Current stocks – at 126.8 million barrels – are 19.9% below their level a year ago and 16% below the five-year average.
Refinery prices: Refinery utilization, at 89.8%, was up 0.1% from the previous week.
WTI stabilized at a six-week high yesterday after crude inventories fell further. Despite some downside risks associated with the demand problems induced by the Omicron variant, the oil / energy market has undoubtedly rebounded from the drop in consumption and prices due to the 2020 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 nearly 17% since mid-March. In addition, it appears that fears of a slowing recovery in demand for oil from the Omicron variant are starting to ease, with the tension likely to be short-lived and less deadly than expected. At the same time, the available vaccines could be effective in neutralizing it.
The tightening outlook for supply and demand has prompted OPEC + to ramp up production to the 400,000 barrels per day forecast next month. The group seems reasonably confident about the trajectory of demand, which should be enough to absorb the additional crude.
To take advantage of the strong backdrop of oil demand, 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 (IS – Free Report): 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 49.3% over 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 95.5% in one year.
Vermilion Energy (VETERINARY – Free Report): Vermilion Energy is valued at around $ 2 billion. Zacks’ consensus estimate for 2022 VET profits has been revised up 35.1% in the past 60 days.
Vermilion Energy has beaten Zacks’ consensus estimate with an average of 54.4% over the past four quarters, including a 100% beat in the third quarter. VET shares have gained around 148.3% in one year.
Murphy USA (MUSA – Free Report): Murphy USA is valued at around $ 5.1 billion. MUSA’s consensus estimate for 2022 has been revised up 7.9% over the past 60 days.
MUSA has beaten Zacks’ consensus estimate for earnings in three of the past four quarters, averaging 20.9%. Murphy USA grew about 56.6% in one year.