Crude prices buoyed despite bearish gasoline data
Oil prices were steady in the morning prior to the testimony and prepared statement from Fed Chairman Ben Bernanke and the release of the Department of Energy’s inventory report. Prices remain elevated on a WTI basis as increasing pipeline capacity out of land locked Cushing Oklahoma has allowed the spread of WTI to Brent crude oil to narrow from a high seen in the beginning of the year of $23 dollars a barrel to current levels near $3 per barrel.
WTI prices barely reacted to Tuesday evenings worse than expected inventory numbers released by the American Petroleum Institute. According to the API, crude oil inventories dropped by 2.6 million barrels during the previous week, which was in line with expectations. What surprised market participants was the increase in gasoline stocks by 2.5 million barrels where average expectations were for a draw of 1.5 million barrels. A build of gasoline during driving season as refiners are attempting to produce more gasoline can only mean that demand has declined if the statistics are accurate.
The Department of Energy report showed similar numbers but they more volatile than the API numbers. According to the Energy Information Administration, U.S. crude oil inventories decreased by 6.9 million barrels from the previous week. Gasoline inventories increased by 3.1 million barrels last week and are well above the upper limit of the average range. Distillate fuel inventories increased by 3.9 million barrels last week and are in the lower half of the average range for this time of year.
Crude oil prices bounced off of support near the 10-day moving average and closed higher on the trading session. The RSI continues to flash a warning sign with the index printing above the 70 overbought trigger level.
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