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Crude Oil Slumps as Supply Overwhelms Demand

David Becker
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Crude oil prices move lower during the past week despite stronger than expected demand, which was overwhelmed by robust supplies. Demand for distillates continues to remain strong ahead of the US driving season. Hedge fund traders purchased heating oil, but their efforts failed to propel crude oil prices.

Distillate inventory levels remain low despite a small increase in stocks that was reported by this week’s estimate from the Department of Energy. According to the Energy Information Administration, U.S. commercial crude oil inventories increased by 3.5 million barrels from the previous week. Gasoline inventories decreased by 0.3 million barrels last week, and are in the lower half of the average range. Distillate fuel inventories increased by 0.6 million barrels last week but are below the lower limit of the average range for this time of year.

On the demand front, over the last four weeks, gasoline demand averaged 8.7 million barrels per day, up by 1.8% from the same period last year. Distillate fuel demand averaged over 3.9 million barrels per day over the last four weeks, up by 5.2% from the same period last year. Jet fuel demand is up 2.6% compared to the same four-week period last year.

Hedge fund traders added to long futures and option position according to the latest commitment of traders report released for the date ending April 15, 2014. According to the CFTC, managed money increased long futures and options position by 8K contracts or 23% of the long open interest.

Crude oil prices are trading at the bottom end of the current range after failing to break through resistance near 105. Support on crude oil is seen near 101.00.

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