Oil Inventories & Capacity Act As Booster (OIH, VLO, PSX, USO)

The U.S. Department of Energy has released its weekly oil inventory data showing a build up in crude inventories as expected.  The rise came to +2.128 million barrels of crude oil to 381.64 million barrels, which is higher than the 1.4 million projected by Dow Jones and higher than the 1.5 to 2.0 million barrels we had been looking for.

Gasoline stocks drained as crude rose, with a drop of -2.797 million barrels to 204.3 million barrels.  Dow Jones was expecting a drop of only 300,000 and we were only expecting a drop of 500,000 or a tad more.

Distillate stocks fell by 969,000 barrels down to 119.8 million barrels.  Dow Jones was calling for a drop of only 200,000 barrels and we do not track estimates on this reading.

The big reading comes on the refining side as refineries ran at 88.3% capacity in the last week.  This is up from 86.4% the prior week and well above the 86.7% expected from Dow Jones.  We were hoping for 87% but any gains would have been welcome here if you are in the camp of ample supplies of gasoline and other finished products ahead of the key Memorial Day weekend surge in gasoline demand.

Market Vectors Oil Services ETF (AMEX: OIH) has risen into this news with a gain of 1.9% to $36.94 and this is off of nearly 52-week lows as the 52-week range is $35.80 to $45.14.  That refining capacity should be a boost for Valero Energy Corporation (NYSE: VLO) with again of 3.4% at $22.25 and the newly-listed Phillips 66 (NYSE: PSX) with a gain of 1.4% at $32.12.

Even the United States Oil (AMEX: USO) is up 0.6% at $35.50.

JON C. OGG