Oil Rallies Despite Headwinds
Today’s Spotlight Market
Crude Oil futures posted a third consecutive positive session after the EIA reported a large inventory build, despite a decline in production.? Oil prices have been making good progress in recent weeks, even as the market faces headwinds.?? Overnight, the market was greeted with more bad news, as China?s manufacturing sector reported disappointing data.? The official government PMI came in at a paltry 49.0 in February, down from 49.4 in January.? The Oil market shrugged off the contraction in Chinese manufacturing and inventory build.
Fundamentals
According to the EIA, Crude Oil inventories rose by a 10.4 million barrels last week, exceeding the analyst estimate of a 9.9 million barrel build.? Total Crude Oil production in the US decreased by 25,000 barrels per day, dropping the daily output to 9.077 million barrels per day.? This can be attributed to a decrease in refinery demand for Crude Oil, which can be attributed to a conscious decision by refiners to scale back production for economic reasons.? Refineries had increased output in the final quarter of 2015, exceeding demand.? Demand could remain soft in upcoming weeks, as refinery maintenance season kicks in, leading to lowered output.? However, many market observers expect refinery output to ramp up ahead of the driving season.? There has been anecdotal evidence that storage facilities in Cushing, OK are not accepting new storage agreements at this time.? The storage facility is at currently around 80% full, which can be viewed as operational capacity.? At the current build level, it would take less than half the year until the choke point for the facility.? There is no choice but to trim Crude Oil production as there is not enough refinery demand or storage for US Oil.
Technical Notes? -? View Today’s Chart
Turning to the chart, the April Crude Oil contract traded though the near-term minor resistance mark around 33.65.? Prices closed slightly below the 35.00 level.? The next area of resistance may be found around the 38.15 level.? The RSI indicator is showing overbought technical conditions, which may make it a bit of a grind in upcoming sessions.
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