(VLO) Another Sharp Drop in Crude Supplies

The U.S. Energy Department’s weekly inventory release showed a steep drawdown in crude stockpiles. The report further revealed that within the ‘refined products’ category, gasoline stocks dropped, while distillate supplies were up from the week-ago levels. Meanwhile, refiners pulled back their utilization rates by 1.4%.

The Energy Information Administration (EIA) Petroleum Status Report, which contains data for 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 businesses of companies engaged in the oil and refining industry, such as ExxonMobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero Energy Corp. (VLO) and Tesoro Corp. (TSO).

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 5.41 million barrels for the week ending August 17, 2012, following a slide of 3.70 million barrels the week before.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. (MHP), had expected oil stocks to go down some 2 million barrels. A dip in the level of imports led to the fourth consecutive weekly stockpile drawdown with the world’s biggest oil consumer even as refiners lowered their utilization rates.

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 – edged up by 45,000 barrels from previous week’s level to 45.24 million barrels. Stocks are just under the all-time high of 47.78 million barrels reached earlier in June.

At 360.75 million barrels, current crude supplies are 2.5% above the year-earlier level, and are over the upper limit of the average for this time of the year. The crude supply cover was down from 23.4 days in the previous week to 23.2 days. In the year-ago period, the supply cover was 22.6 days.

Gasoline: Supplies of gasoline decreased for the fourth time in as many weeks despite domestic consumption declining 2.4% to 9.08 million barrels a day. The fall in gasoline inventories could be attributed to lower production and imports.

The 962,000 barrels drop – slightly below analyst projections – took gasoline stockpiles down to 202.74 million barrels. As a result of this decrease, the existing inventory level of the most widely used petroleum product is now 4.1% off the year-earlier levels and is in the lower limit of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) inched up by 992,000 barrels last week, essentially in line with analyst expectations. The rise in distillate fuel stocks – the second in as many weeks – could be attributed to weaker demand and higher production. This was partially offset by lower imports.

At 125.21 million barrels, distillate supplies are 19.6% below the year-ago level and are under the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 1.4% from the prior week at 91.2%. Analysts were expecting the refinery run rate to be unchanged at 92.6%.

Read the full analyst report on “XOM”
Read the full analyst report on “CVX”
Read the full analyst report on “VLO”
Read the full analyst report on “MHP”
Read the full analyst report on “TSO”
Read the full analyst report on “COP”
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