Oil Bull Lives Despite Record U.S. Inventories
Today’s Spotlight Market
Those traders who follow the Oil markets closely will notice that the price premium for Brent Crude Oil has increased over WTI, as geopolitical fears have overshadowed the drawdown in inventories in Cushing, Oklahoma, which is the delivery point for the NYMEX WTI futures. Inventories at Cushing fell by 788,000 barrels last week to stand at just over 26 million barrels, which is the lowest inventory totals at Cushing in 4 ? years. Inventory drawdowns at Cushing would normally be a bullish fundamental for WTI Crude vs. Brent, but this is currently being overshadowed by concerns that possible sanctions against Russia could hamper the nation?s Oil exports. This fare has led to a nearly $3.50 increase in the front-month Brent premium vs. WTI Crude in the past 2 weeks.
Fundamentals
Crude Oil prices remain stubbornly above the $100 per barrel price level, despite government data showing record inventories. The most recent release of the weekly Energy Information Administration (EIA) energy stocks report showed U.S. Oil inventories rose by 3.5 million barrels last week to stand at a record 397.659 million barrels as of April 18th. Inventories are over 9 million barrels higher than last year, and a whopping 26.2 million barrels above the 5-year average. The inventory gains came despite lower Oil imports and higher refining utilization rates last week.
While U.S. Oil inventories are at more than ample levels, one cannot say the same about Oil products. U.S. Gasoline inventories fell by 274,000 barrels last week according to the EIA, which put inventory totals at just over 210 million barrels. Gasoline stocks are running nearly 8 million barrels below last year?s totals and just over 14 million barrels below the 5-year average. The saving grace for U.S. motorists is that current gasoline demand is still running below last year?s levels.
The situation for middle distillates such as Heating Oil and diesel is even tighter than that of Gasoline, as last week?s 2.765 million barrel decline in inventories has U.S. stocks running over 24 million barrels below the 5-year average, while demand is running above last year. Given the political concerns regarding Russia and its involvement in Ukraine and the possibility of both political and economic sanctions against one of the world?s largest Oil producing nations, it will be difficult for the Crude Oil prices to shed the risk premium that appears in place, as market participants will be hesitant to become aggressively short the Oil market despite what appears to be ample supplies in the market.? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for June Crude Oil, we notice prices have been in an uptrend since January, with only a minor price correction seen in early March.? Although prices are holding above the 200-day moving average (MA), Tuesday?s price decline has caused the market to pull back towards the short-term 20-day MA, where it appears some short-term buying interest has been found. The 14-day RSI remains in neutral territory, with a current reading of 53.94. Near-term support is found at 101.20, with resistance seen at 104.10.????
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