Cushing Worry amid Bullish EIA Data

The U.S. Energy Department’s weekly inventory release showed an unexpected drop in crude stockpiles though supplies at the key delivery hub of Cushing hit a record high. The agency’s report further added that fuel inventories were off from the previous week levels, while refinery run-rates increased.

The Energy Information Administration (“EIA”) Petroleum Status Report – which contains data for the previous week ending on 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 to 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 oil and refining industry, such as ExxonMobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Valero (VLO) and Tesoro (TSO).

Crude Oil

The federal government’s EIA report revealed that crude inventories with the world’s biggest oil user fell by 364 thousand barrels for the week ending February 25, 2011, contrary to expectations of a gain set by analysts who had been surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. (MHP).

The decrease in oil stocks – on the back of falling imports and improved refinery operations – follows a 6-week trend of steady build in supplies, which rose by more than 23.6 million barrels during the period.

At 346.4 million barrels, crude supplies are 1.4% above the year-earlier level and are above the upper limit of the average for this time of the year. The crude supply cover was up from 24.7 days in the previous week to 24.9 days. In the year-ago period, the supply cover was 24.6 days.

In particular, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures – rose 1.1 million barrels in the latest week to hit a new all-time high of 38.6 million barrels.

As a result of the continued glut in the domestic oil stocks and concerns that the violence in Libya will boil over to other oil rich nations in the Middle East and lead to a supply shortfall, crude prices are currently trending at around the $102 a barrel.

Gasoline

Supplies of gasoline fell for the second successive week, as demand edged up by 61 thousand barrels per day and import levels remained steady.

The 3.6 million barrel drop – against analyst projections for a build – took gasoline stockpiles to 234.7 million barrels, down from a 20-year high of 241.1 million barrels reached a couple of weeks ago. Current inventory levels are 1.2% higher than year-earlier levels and are above the upper half of the average range.

Distillate

Distillate fuel inventories (including diesel and heating oil) were down by 751 thousand barrels last week, failing to match forecasts for a higher fall. The decrease in distillate fuel supplies can be attributed to higher demand (by 43 thousand barrels per day), partly offset by a rise in production.

At 159.2 million barrels, distillate supplies were 4.9% more than the year-ago level and also above the upper boundary of the average range for this time of the year.

Refinery Rates

Refinery utilization was up 1.5% from the prior week to 80.9%.

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