Unrest in Egypt boosts oil prices
Oil prices received a boost on Tuesday and continued to rise Wednesday as fear over unrest in Egypt helped WTI spike above 100 dollar per barrel. The rally came despite an expected drop in demand for gasoline as reflected by the American Petroleum Institute’s report on inventory released on Tuesday evening.
WTI has been increasing at a steady rate and the spread between WTI and North Sea Brent has collapsed to $3.5 per barrel the lowest seen in more than 2 years. The spread moved as high as $23 dollars a barrel and the decline is a function of more pipeline capacity that is growing throughout the United States.
Oil prices did face some adversity as the Challenger Job report, showed 8% jobs cuts in the month of June which was higher than expected and greater than the 5% year over year seen during the month of May.
Inventories showed solid results as U.S. commercial crude oil inventories decreased by 10.3 million barrels from the previous week. Gasoline inventories decreased by 1.7 million barrels last week while distillate fuel inventories decreased by 2.4 million barrels last week and near the lower limit of the average range for this time of year.
Technically crude oil looks very robust as it could easily move higher and test 102.50 after breaking out above the 100 dollar a barrel level. Support is seen near the Bollinger band high at 100.57. The RSI is getting close to the danger zone as it is printing near 67 which is on the high end of the neutral range. Momentum continues to climb with the MACD hitting its highest levels in the past 6-months after generating a buy signal on Monday. The MACD moved from negative to positive confirming the buy signal on the momentum index.
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