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Oil Surges on Solid Inventory Report

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Oil Surges on Solid Inventory Report

Oil prices received a boost on Wednesday on the heel of Tuesday API report which showed a larger than expected decline in crude oil stocks.  The move above $106 on a WTI basis comes despite weaker than expected trade numbers released in China during the Asian session.  Wednesday EIA energy report failed to damper enthusiasm.

The bump up in oil prices in AM trade above the $105 level came after the American Petroleum Institute late Tuesday said crude supplies fell 9 million barrels for the week ended July 5. Analysts’ expectations had projected a decline of 3.8 million barrels.

The news of China’s exports and imports which came in worse than expected rattled investors.  Exports fell 3.1% in May on a year over year basis.  It is the first outright decline in over a year and the largest drop since October 2009. The consensus expected a 3.7% increase.  Imports slipped 0.7% while the consensus expected a 6.0% rise.  The net result was a $27.1 billion surplus after a $20.4 billion surplus in May.  China Q2 GDP is due out July 15, and many think there are downside risks to the consensus 7.5% year over year growth.

The weekly crude oil prices have broken out of a range that was encapsulated by the $102 level and has propelled crude oil toward resistance near $110.  Prices were initially pushed higher by supply concerns as Middle Easter tensions generated fears that crude oil flow would be curtailed by troubles with the Suez Canal.

Weekly momentum is moving higher as the MACD generated a buy signal were the spread (the 12-week moving average minus the 26-week moving average crossed above the 9-week moving average of the spread).  The index moved from negative to positive territory confirming the buy signal. The weekly RSI is printing near 64 which is on the upper end of the neutral range.

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