Wednesday’s DOE Numbers Could Determine the Fate of Energy Stocks
Oil services stocks have broken out and continue to move higher in April. The strength comes as WTI crude oil holds steady near $101.20 after climbing nearly 4% over the past month. WTI inventories in Cushing Oklahoma have declined nearly 19 million barrels over the past 4-weeks but crude stocks in other regions have easily offset those losses. Strong production has outweighed demand, but as investors look forward to the US driving season, gasoline inventories will become a much more watched statistics.
West Texas Intermediate crude oil is the benchmark for US crude oil trading and it is priced in Cushing Oklahoma. The recent startup of the Marketlink pipeline has allowed crude oil to flow from Cushing to the Gulf where refiners are purchasing crude. Part of the increase in WTI is a reflection of crude oil moving out of Cushing and toward the Gulf of Mexico, which has buoyed WTI given the decline in storage in Cushing. This has increased the discount gulf crude are trading under WTI.
Oil producers and service companies are on the move, but if inventories gasoline stocks show builds, and demand falters, these stocks will be hammered given their recent rise. Traders should keep a careful eye on the Department of Energy’s inventory released which is scheduled to be report on Wednesday at 10:30 EST.
The XLE energy spider select has broken out above resistance and could continue to see positive momentum. The MACD (moving average convergence divergence) index recently generated a buy signal as the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The RSI is moving higher with price action reflecting accelerating positive momentum while printing near 67 which is on the upper level of the neutral range.
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