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Will Petrolelum Demand Hold Up?

David Becker
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It is hard to get a handle on the state of the US economy and how the modest growth will affected petroleum prices. There are few bright spots in the global economic landscape, as the US is though of as the best of a soft lineup. US data has faltered in the past two months as colder than normal weather and storms have blanketed most of the country. Unfortunately for heating fuel consumers the weather is adding insult to injury.

Heavy snow and polar like temperatures had driven distilate demand up to the highest levels of 2014. Total demand for products continued to climb as consumption averaged over 19.2 million barrels per day, up by 5.0% from the same period last year, as reported by the Energy Information Adminisration this past Wednesday. Distillate fuel demand averaged 4.0 million barrels per day over the last four weeks, up by 12.7% from the same period last year. Jet fuel demand is up 5.5% compared to the same four-week period last year.

Economic data released last week showed mixed results which has barely affected the trajectory of crude oil prices. The week started off on the defensive after the ISM released a weaker than expected manufacturing report. January manufacturing slumped to a reading of 51.3, its lowest reading since May, though still indicating an expansion of activity. The metric missed a projected 56 and marked a drop from December’s 56.5.

The past week was anchored by the government employment report which printed at reading that was very disappointing. The BLS reported that 113,000 jobs were created which was weaker than the 189,000 expected by economists. Traders initially were able to pass on the soft report as a weather event. The colder than normal temperatures as well as, the nasty ice and snow storms, likely eroded job creation. The unemployment rate printed at 6.6% which was in line with expectations.

Crude prices moved higher on Tuesday, and are poised to test resistance near a downward sloping trend line that comes in near $99. Support is seen near the 10-day moving average at $97.34. Momentum is poised with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory.

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