U.S. oil prices moved down on Nov 16 after government data showed a weekly build in gasoline and distillate supplies. On the New York Mercantile Exchange, WTI crude futures settled at $85.59 a barrel yesterday — the lowest since Oct 25.
Before going into the overall macro environment for oil, let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the week ending Nov 11.
Analyzing the Latest EIA Report
Crude Oil: The federal government’s EIA report revealed that crude inventories fell 5.4 million barrels compared to expectations of a 400,000-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The combination of a surge in exports, lower imports and higher refinery demand accounted for the big stockpile draw with the world’s biggest oil consumer.
Total domestic stocks now stand at 435.4 million barrels — 0.6% more than the year-ago figure but 4% lower than the five-year average.
The latest report also showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) fell 1.6 million barrels to 25.6 million barrels.
Meanwhile, the crude supply cover decreased from 28 days in the previous week to 27.4 days. In the year-ago period, the supply cover was 28.5 days.
Let’s turn to the products now.
Gasoline: Gasoline supplies increased for the first time in five weeks. The 2.2 million-barrel rise was primarily attributable to a pullback in demand. Analysts had forecast that gasoline inventories would fall 800,000 barrels. At 207.9 million barrels, the current stock of the most widely used petroleum product is 1.9% less than the year-earlier level and 5% below the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) increased after dropping last week. The 1.1 million-barrel gain reflected a fall in demand. Meanwhile, the market looked for a supply draw of some 500,000 barrels. Despite last week’s build, current inventories — at 107.4 million barrels — are 13.2% below the year-ago level and 15% lower than the five-year average.
Refinery Rates: Refinery utilization, at 92.9%, rose 0.8% from the prior week.
Even as fears revolving around high inflation and slowing growth somewhat cloud the outlook for Oil/Energy, it has remained the best S&P 500 sector this year. The space has generated a total return of more than 66% in 2022 against the S&P 500’s loss of around 17%. Apart from a positive fundamental picture, the sector is enjoying support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity.
Oil has pulled back from those lofty levels, with the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC agreeing on a production curtailment means that the commodity has got enough reasons to stay elevated in the near-to-medium term.
Consequently, three of the top four gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum OXY, Hess Corporation HES and Marathon Oil MRO.
Occidental Petroleum: OXY is the top-performing S&P 500 stock in 2022, with a gain of 148%. Occidental Petroleum beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 12.7%, on average.
OXY has a projected earnings growth rate of 289.4% for this year. Occidental Petroleum is valued at around $68 billion.
Hess Corporation: Hess shares have appreciated 98% so far in 2022. HES has a projected earnings growth rate of 231.1% for this year.
Hess, with a market capitalization of $46 billion, enjoys a Zacks Growth Style Score of A. HES beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 8.1%.
Marathon Oil: This stock is among the best performers on the S&P 500 Index, with shares having appreciated 92% in 2022. MRO, carrying a Zacks Rank #3 (Hold), has a projected earnings growth rate of 190.5% for this year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Oil beat the Zacks Consensus Estimate for earnings in each of the last four quarters. MRO has a trailing four-quarter earnings surprise of 13.9%, on average.
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