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Strong Demand for Products Fails to Lift Crude Oil

David Becker
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Despite a solid draw of crude oil stocks and increasing sales of automobiles in the US, crude oil prices remain under pressure after declining significantly over the last three trading session. Hedge fund traders continued to exit long position in futures an options according to the latest industry report.

Earlier in the week, automakers reported higher-than-expected U.S. new car sales of 1.6 million in May, with rising consumer demand underpinning a broader recovery in the U.S. economy, according to the Commerce Department. The auto industry in May recorded its strongest annual sales rate since before the 2008 recession. Industry sales rose 11.3 percent to 1,606,264 vehicles. This would lead an investor to believe that increases in demand for gasoline are right around the corner.

Inventories of crude oil continued to decline according to the latest estimate from the EIA. According to the Department of Energy, U.S. commercial crude oil inventories decreased by 3.4 million barrels from the previous week. At 389.5 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Gasoline inventories increased by 0.2 million barrels last week, and are in the middle of the average range. Distillate fuel inventories, which include heating oil, increased by 2.0 million barrels last week but are below the lower limit of the average range for this time of year.

On the demand front, gasoline demand averaged 9.2 million barrels per day, up by 5.4% from the same period last year. Distillate fuel demand averaged 4.1 million barrels per day over the last four weeks, up by 6.9% from the same period last year.

Crude oil prices remain below resistance near the 10-day movign averager at 103.05. Support is seen near the recent lows at 101.75. Momentum has turned negative with the MACD generating a sell signal. The RSI is printing near 52, which is in the middle of the neutral range.

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