Crude prices surge on Middle East tensions
Crude prices continued to move higher despite a stronger dollar on the heels of unrest in Egypt. The new government, which took over the Middles Eastern country on Wednesday is not a large oil producer but is situated in a region that could create unrest. Access to the Suez Canal could be hampered by Egyptian unrest which could generate a bottle neck in transportation.
Crude oil volatility has skyrocketed, driving up the price of WTI to 103, which is closing in on weekly highs near 102.50. Wednesday stronger than expected draws in crude oil, as reported by the Department of Energy is also creating upside strength.
According to the Department of Energy, U.S. crude oil inventories declined by 10.3 million barrels last week. The decline was well above the 2 million barrel draw expected by economists. U.S. crude oil inventories are above the upper limit of the average range for this time of year, but are declining at a rapid trajectory just as refiners are coming back from maintenance. Total motor gasoline inventories decreased by 1.7 million barrels last week, while distillate fuel inventories decreased by 2.4 million barrels last week.
Crude oil prices rallied above 103 as momentum gains strength. Resistance is seen near 102.50, while support is seen earn former resistance at 99.20. The MACD generated a buy signal this week as the spread crossed above the 9-day moving average of the spread. The RSI (relative strength index) is printing near 71, after breaking higher along with price action. The print is now above the overbought trigger level of 70 which could be a warning sign that prices could soon reverse.
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