The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a big jump, as imports climbed and refiners scaled down their utilization rates The report further revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels on weakening demand.

Following the bearish crude data from the U.S. government, West Texas Intermediate (WTI) crude futures tumbled to around $85 per barrel, the lowest since December 2012.

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories jumped by 5.02 million barrels for the week ending Oct 3, 2014, following a decrease of 1.36 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. – had expected crude stocks to go up some 2.1 million barrels. A sharp uptick in the level of imports and drop in refinery utilization rates on the back of seasonal maintenance, together with higher domestic production – now at their highest level since 1986 – led to the massive stockpile build-up with the world's biggest oil consumer.

However, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were down 1.58 million barrels from the previous week’s level to 18.93 million barrels. Stocks are currently 63.5% under the all-time high of 51.86 million barrels reached in Jan 2013.

Following the first inventory increase in 3 weeks, at 361.65 million barrels, current crude supplies are down 2.4% from the year-ago period and is within the upper limit of the average for this time of the year. The crude supply cover was up from 22.1 days in the previous week to 22.7 days. In the year-ago period, the supply cover was 23.9 days.

Gasoline: Supplies of gasoline were up after three successive weekly declines, as domestic consumption weakened. This was partially offset by lower production and imports.

The 1.18 million barrel gain – counter to analysts’ projections for a 1.1 million barrels decrease in supply level – took gasoline stockpiles up to 209.67 million barrels. Despite this build, the existing inventory level of the most widely used petroleum product is 4.6% lower than the year-earlier level and is at the middle of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 439,000 barrels last week, defying analysts’ expectations for a drop in inventory level. The increase in distillate fuel stocks – the sixth time in 7 weeks – could be attributed to tepid demand and strong imports, somewhat negated by lower production.

At 126.14 million barrels, distillate supplies are essentially in line with the year-ago level and are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.5% from the prior week to 89.3%.

About the Weekly Petroleum Status Report

The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending 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 understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.

The data from EIA generally acts as a catalyst for crude prices and affect producers, such as Exxon Mobil Corp. (XOM - Analyst Report), Chevron Corp. (CVX - Analyst Report) and ConocoPhillips (COP - Analyst Report), and refiners, such as Valero Energy Corp. (VLO - Analyst Report), Phillips 66 (PSX - Analyst Report) and HollyFrontier Corp. (HFC - Snapshot Report). With an improvement/deterioration in the companies’ ability to generate positive earnings surprises, they can then move higher/lower from their current Zacks Rank.

As of now, all the above-mentioned companies retain a Zacks Rank #3 (Hold), implying that they are expected to perform in line with the broader U.S. equity market over the next one to three months.