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Crude oil rallies on back of strong demand

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Crude oil rallies on back of strong demand

WTI prices soared higher during the week, moving above $108 dollars per barrel on its way to weekly resistance near $110.65.  Prices were buoyed by better than expected inventory data released by the Department of Energy on Wednesday.  While supply out of the United States is at record highs, demand continues to keep pace driving up the price of crude oil.

Crude oil prices have been buoyed by larger than expected draws of inventories over the past three weeks.  The aggregate total of crude oil stock draws have total more than 27 million barrels over the past three week as refiners run at peak capacity to create gasoline and distillates.

Crude oil stocks have moved from well above the 5-year range, to within the 5-year range and are poised to continue to move lower.  The trajectory of the crude oil draw is accelerating, as demand for gasoline continues to gain strength.

U.S. commercial crude oil inventories decreased by 6.9 million barrels from the previous week. At 367.0 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Distillate fuel inventories, which include diesel fuel and heating oil increased by 3.9 million barrels last week but are in the lower half of the average range for this time of year.

Crude oil futures prices soared to new 2013 highs, with support seen near the 10-day moving average at 105.95 and resistance seen near the mid-2012 highs at 100.65.  Momentum continues to point to higher prices with the MACD printing in positive territory.  The RSI (relative strength index) is flashing a warning sign, printing at 76, which is above the overbought trigger level of 70.  Investors who are long should have a trailing stop to avoid a quick liquidation in crude oil.

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