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Crude Oil Retakes $100 on Solid Distillate Demand

David Becker
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Crude oil prices edged higher on Thursday after recapturing $100 per barrel on Wednesday following a stronger than expected inventory report released by the Department of Energy on Wednesday. While crude oil stocks moved lower, the big catalyst was the strong increase in demand reported for distillates which include diesel, and heating oil.

According to the Energy Information Administration, U.S. commercial crude oil decreased by 1.8 million barrels from the previous week. At 397.6 million barrels, U.S. crude oil inventories are above the average range for this time of year. Gasoline inventories increased by 1.6 million barrels last week, and are in the middle of the average range. Distillate fuel inventories decreased by 0.4 million barrels last week and are below the lower limit of the average range for this time of year. Diesel fuel has been the most recent catalyst driving the change in inventories mainly based on increasing demand.

Over the last four weeks, gasoline demand averaged over 8.6 million barrels per day, up by 1.4% from the same period last year. Distillate fuel demand averaged about 4.1 million barrels per day over the last four weeks, up by 11.6% from the same period last year. Jet fuel demand is down 0.8% compared to the same four-week period last year.

Crude prices are trading in a large daily range between 98 and 105. Resistance is seen near the 20-day moving average near 101.65. Support is seen near the 10-day moving average near 100.20. Momentum remains negative with the MACD (moving average convergence divergence) index printing in negative territory after generating a sell signal in late April. The trajectory of the MACD is flattening, which reflects the current consolidating in crude oil prices.

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