Today’s Spotlight Market
Crude Oil futures reached 7-month highs in overnight trading after the American Petroleum Institute (?API?) announced a larger than expected drawdown in inventory levels. Traders await today’s Energy Information Administration (?EIA?) inventory report to offer confirmation of the API. Prices have continued to march on, despite uncertainty over Fed policy for the rest of the year. Economic data has been strong enough to suggest that the global economy can withstand both higher energy prices and higher interest rates.
Fundamentals
The API reported an inventory drawdown of 5.1 million barrels of Crude Oil last week. This more than doubled analysts? estimates of a 2.5 million barrel reduction from US stockpiles. The market bias has favored the bull camp, and what does not impede momentum only fuels the rally. Due to API data, many traders are now looking for a similar inventory decrease in today’s EIA report. Additionally, some traders are expecting the EIA to report that US Crude Oil production has fallen to below 9 million barrels per day, down from peak production of 9.7 million barrels per day. The recent supply disruptions in Canada, Libya and Nigeria have supported prices and likely greatly reduced downside risk for Oil.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the July Crude Oil contract steadily trending higher. Prices have reached their highest levels since October and could test the relative weekly high close from last month of 49.63. There is heavy chart congestion between the 47.75 and 53.20 levels. If the Oil market can breakout here, the real test comes in around 60.00, which is stout resistance. The RSI has moved into overbought territory, which could be a drag on prices in the near-term.
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