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Oil Prices Jump as U.S. Supplies Post a Big Weekly Decline

U.S. oil prices rallied Wednesday to their highest settlement since May 1 after government data revealed a massive weekly drawdown in crude to go with the drop in gasoline and distillate supplies. On the New York Mercantile Exchange, WTI crude futures rose $1.43 (or 2%) to close at $74.34 a barrel yesterday.

Some oil-related stocks that could benefit in the current environment include NOW Inc. DNOW, Murphy USA MUSA and Dril-Quip, Inc. DRQ.

Let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the week ending May 19.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 12.5 million barrels — the highest in 2023 — compared to expectations of a 500,000-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The combination of higher exports, a pullback in imports and a pickup in refinery demand accounted for the big stockpile drop with the world’s biggest oil consumer even as U.S. production rose.

Total domestic stocks now stand at 455.2 million barrels — 8.4% more than the year-ago figure but 3% lower than the five-year average.

However, on a slightly bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) gained 1.8 million barrels to 37.2 million barrels.

Meanwhile, the crude supply cover decreased from 29.5 days in the previous week to 28.7 days. In the year-ago period, the supply cover was 26.5 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the third time in as many weeks. The 2.1 million-barrel fall was primarily attributable to a surge in demand. Analysts had forecast that gasoline inventories would drop 800,000 barrels. At 216.3 million barrels, the current stock of the most widely used petroleum product is 1.5% less than the year-earlier level, while it is 8% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) dropped for the ninth time in the past 11 weeks. The 561,000-barrel decrease reflected higher usage. Meanwhile, the market looked for an unchanged supply level. Following last week’s decline, current inventories — at 105.7 million barrels — are 1.1% below the year-ago level and 18% lower than the five-year average.

Refinery Rates: Refinery utilization, at 91.7%, edged down 0.3% from the prior week.

3 Energy Stocks to Buy

Investors interested in the energy space might look at operators like NOW Inc., Murphy USA and Dril-Quip, each carrying a Zacks Rank #2 (Buy) currently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NOW Inc.: DNOW beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. NOW has a trailing four-quarter earnings surprise of 32.1%, on average.

DNOW is valued at around $1 billion. NOW has seen its shares lose 11.7% in a year.

Murphy USA: It is valued at some $6 billion. The Zacks Consensus Estimate for MUSA’s 2023 earnings has been revised 4.4% upward over the past 30 days.

Murphy USA, headquartered in El Dorado, AR, beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. MUSA shares have gained 12.3% in a year.

Dril-Quip: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. DRQ has a trailing four-quarter earnings surprise of 119.8%, on average.

Dril-Quip is valued at around $828.7 million. DRQ has seen its shares fall 22.1% in a year.

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