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Crude Oil Hits Contracts Highs Driving Up Energy Shares

David Becker
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Crude Oil Hits Contracts Highs Driving Up Energy Shares

Crude oil prices surged on Wednesday driving up energy shares after the Department of Energy reported a large than expected draw in inventories in their weekly inventory report. Demand continues to be impressive as refiners draw both gasoline and heating from stockpiles.

Crude oil supplies at Cushing have drained from 41.8 million barrels in late January to 23.2 million barrels as of May 16, the lowest level since 2008, according to the U.S. Energy Information Administration. The decline in stocks is pushing WTI higher and pushing pressure on product cracks such as heating oil and gasoline. With crude oil imports declining, there could a continued squeeze in WTI.

U.S. crude oil imports averaged about 6.5 million barrels per day last week, down by 658,000 barrels per day from the previous week, and at a 17-year low. Over the last four weeks, crude oil imports averaged 7.0 million barrels per day, 11.3% below the same four-week period last year. The decline in imports is a function of high production in the US, but that production is not making it to Cushing.

U.S. commercial crude oil inventories decreased by 7.2 million barrels from the previous week. The decline is one of the largest in 2014. Total gasoline inventories increased by 1.0 million barrels last week, and are in the middle of the average range. Distillate fuel inventories increased by 3.4 million barrels last week but are below the lower limit of the average range for this time of year.

Demand continues to remain strong. Over the last four weeks, gasoline demand averaged over 8.9 million barrels per day, up by 5.3% from the same period last year. Distillate fuel demand averaged 4.1 million barrels per day over the last four weeks, up by 7.7% from the same period last year.


Crude prices are higher on Thursday and are poised to test target resistance near 105. Support is seen near the 50-day moving average near 101.10. Momentum is higher with the MACD (moving average convergence divergence) index generating a buy signal. The RSI is also higher reflecting accelerating positive momentum, while printing near 65, which is on the upper end of the neutral range.

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