Oil Inventories Plummet (USO, OIH, VLO)

The Department of Energy has just released what may seem like a shocking drop in its weekly report on oil inventories.  This morning’s data has a potential impact on the key ETFs of Oil Services HOLDRs (NYSE: OIH) and the United States Oil (NYSE: USO); and are watching Valero Energy Corp. (NYSE: VLO) as a pure-play for the refining angle.

The DOE reported that crude oil stocks fell by a sharp 9.854 million barrels in the last week to 346.018 million barrels.  Dow Jones was looking for a drop of -2.7 million barrels, and we were only expecting a drop of -2 million to -3 million barrels.

Gasoline supplies did manage to grow by 809,000 barrels to over 214.7 million barrels, but Dow Jones was calling for a gain of 1.9 million barrels. Distillates rose by 1.094 million barrels and Dow Jones was calling for -200,000 barrels as the reading.

The Valero angle comes from the refineries, which ran at 88.0% industry-wide per the DOE data.  That compares to Dow Jones estimates of 87.2% and a reading of 87.5% last week.

Oil Services HOLDRs (NYSE: OIH) was in negative territory, but that shot up to up 0.6% at $138.00 right after the news this morning.   United States Oil (NYSE: USO) was negative before the news and its shares have popped to up 0.6% at $38.11.

Valero Energy Corp. (NYSE: VLO) is still negative on the day as the refining play and its shares are down 0.3% at $21.33.

JON C.OGG