Oil Rally Hits Speed Bump But Stays Above $85 on Supply Draw

U.S. oil prices on Thursday fell back from the 2023 highs reached the previous session as concerns over China’s demand and rising volumes from Iran and Venezuela weighed on an otherwise bullish market. A stronger dollar could also be a factor in yesterday’s profit-taking.

Meanwhile, a weekly report from the Energy Information Administration (“EIA”) showing another bigger-than-expected decline in crude stockpiles limited the downside.

On the New York Mercantile Exchange, WTI crude futures lost 67 vents (or 0.8%) to close at $86.87 a barrel yesterday.

With oil remaining above $85 per barrel — a healthy enough level for market participants —investors interested in the sector could benefit from having quality stocks like Solaris Oilfield Infrastructure SOI, CVR Energy CVI and Helix Energy Solutions Group HLX.

Let’s dig deep into the Energy Information Administration’s (“EIA”) Weekly Petroleum Status Report for the week ending Sep 1.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 6.3 million barrels compared to expectations of a 5.3 million barrels decrease per the analysts surveyed by S&P Global Commodity Insights. The stockpile draw with the world’s biggest oil consumer was largely thanks to the jump in exports, in tandem with the strength in U.S. refinery runs that are hovering near the highest level in more than three and a half years. These factors more than offset the continued high domestic production, which, at 12.8 million barrels per day, is at the highest since March 2020.

Total domestic stock now stands at 416.6 million barrels — 2.5% less than the year-ago figure and 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) dropped 1.8 million barrels to 27.4 million barrels.

Meanwhile, the crude supply cover decreased from 25.4 days in the previous week to 25 days. In the year-ago period, the supply cover was 26.4 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the fourth time in five weeks. The 2.7 million-barrel fall was primarily attributable to higher usage and a dip in production. Analysts had forecast that gasoline inventories would decline 840,000 barrels. At 214.7 million barrels, the current stock of the most widely used petroleum product is essentially at the year-earlier level, while it is 5% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the fourth week in a row. The 679,000-barrel increase primarily reflected a pullback in exports. Meanwhile, the market looked for an unchanged supply level. Following last week’s build, current inventories — at 118.6 million barrels — are 6.1% above the year-ago level but 14% lower than the five-year average.

Refinery Rates: Refinery utilization, at 93.1%, edged down 0.2% from the prior week.

3 Energy Stocks to Buy

Having gone through the Weekly Petroleum Status Report, investors interested in the energy space might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy).

Solaris Oilfield Infrastructure: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 18.8%.

SOI is valued at around $469.8 million. Solaris Oilfield Infrastructure has seen its shares move up 1% in a year.

CVR Energy: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 44.2%.

CVR Energy is valued at around $3.5 billion. CVI has seen its shares gain 9.7% in a year.

Helix Energy Solutions Group: Over the past 60 days, Helix Energy Solutions Group saw the Zacks Consensus Estimate for 2023 move up 4.3%. The 2023 Zacks Consensus Estimate for HLX indicates 200% year-over-year earnings per share growth.

Helix Energy Solutions Group is valued at around $1.6 billion. HLX has seen its shares surge 159.9% in a year.
CVR Energy Inc. (CVI): Free Stock Analysis Report

Helix Energy Solutions Group, Inc. (HLX): Free Stock Analysis Report

Solaris Oilfield Infrastructure, Inc. (SOI): Free Stock Analysis Report

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