United States Oil Fund LP (ETF) (USO), Chevron Corporation (CVX): Will Oil’s Rally Continue?

Nonetheless, oil companies have seen a rise in petroleum sales during the first quarter of 2013: ExxonMobil’s petroleum sales rose from 2,473 kbd to 2,532 kbd — a 2.4% growth. The main problem oil companies are facing is the drop in oil sales in Asia-Pacific: ExxonMobil’s petroleum sales dropped more than 27% during the first quarter of 2013 in that region. This decline is mainly related to China.

According to China’s manufacturing PMI survey for June,China’s PMI index fell to 50.1, which means China’s manufacturing sectors are still growing but at a slower pace. If China’s economy continues to slow down, it could reflect in a drop in oil consumption in the coming months.

For Chevron Corporation (NYSE:CVX), oil sales fell not only outside the U.S., but also in the U.S: net petroleum sales fell 11.4% in the U.S. during the first quarter of 2013; outside the U.S., net sales dropped 4.8%. If these trends persist, Chevron Corporation (NYSE:CVX)’s revenue might continue to dwindle in the coming months.

Storage

During June, the U.S. Petroleum and oil stockpiles increased 27.7 million barrels; it reached 1,839 million barrels by June 21. The current crude oil stockpiles are also 41.9 million barrels higher than the storage recorded during the same week in 2012. The rise in storage suggests the oil market is loosening up, which may curb the recent rally of oil prices.

Refineries

According the EIA, refinery inputs rose in recent weeks and reached 15.48 million barrels per day, which is still 0.6% below last year’s levels. The relatively low refinery input is reflected in the low numbers recorded by Chevron Corporation (NYSE:CVX) and ExxonMobil in the first quarter of 2013: Exxon’s refinery input in the U.S. fell 0.8% to reach 1,810 kbd; Chevron’s refinery input tumbled 37.8% to 576 kbd.

The chart below shows the developments in U.S. refinery input and oil price in the past year.

Data Source: EIA

The recent rise in refinery input is likely to reflect in an increase in Chevron and ExxonMobil’s inputs in the second quarter of 2013, which will pull up their respective revenue in this business segment.

Takeaway

The recent rally of oil may continue as long as investors are concerned about the developments in the Middle East, but my guess is that this rally won’t last long and once the situation in the Middle East cools down, oil might fall to the low 90s. Until then, oil companies will continue to benefit from the recent rise in oil prices as their profit margins will rise.

The article Will Oil’s Rally Continue? originally appeared on Fool.com and is written by Lior Cohen.

Lior Cohen has no position in any stocks mentioned. The Motley Fool recommends Chevron. Lior is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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