Cushing Squeeze Continues
Today’s Spotlight Market
Crude Oil inventories at the NYMEX?s Cushing, OK delivery point have declined for the 17th time in 18 weeks.? The declines in stockpiles can be attributed to improvements to Oil distribution channels.? It will be interesting to see if this trend will continue.? US production started the year at 8.1 million barrels/day and was expected to reach 8.7 million barrels/ day during the fourth quarter, which could ultimately result in higher inventories at Cushing.? We are also coming up on refinery maintenance season, which could result in higher Crude Oil stocks due to the decrease in capacity utilization.
Fundamentals
Cushing inventories stand at 21.4 million barrels according to the EIA, which is the lowest level for the delivery point in five years.? Supplies at the hub have been on the decline since the Keystone XL pipeline began moving Oil to the Gulf Coast back in January.? The increase in Cushing inventory levels has resulted in the tightening of the WTI-Brent Crude Oil spread.? The spread was nearly $20 back in the latter portion of last year and has been steadily tightening.? If the trend of Cushing destocking continues, the spread has the potential to narrow to parity.? Russia and Ukraine have been inching towards a more amicable relationship, which could sap some of the risk premium out of the Oil market.? Furthermore, it appears that growth in the Eurozone could be slower than that in the US.? Both regions have had a tame inflationary outlook as well.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the July Crude Oil contract in range-bound trading between 97.50 and 105.? The chart pattern and oscillators hint at further sideways trading.? The price channel has narrowed a bit, but not enough to suggest that a breakout is imminent.? The RSI closed the session almost exactly on the 50 line.
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