Oil moves higher after strong GDP report
Oil prices moved higher Wednesday on the heels of a dovish Fed statement and solid economic data. Economic data released by the US government showed better than expected growth, while inventory data continued to show demand strength. Crude oil prices have given back nearly $6 dollars a barrel over the past week, but underlying fundamental strength in the oil batch could keep petroleum prices buoyed.
On Wednesday the Commerce Department reported better than expected GDP data which showed that the US economy grew at 1.7% in the second quarter compared to expectations of a 1% increase. Business investment drove the increase in GDP. Additionally, most of the increase seemed to be transferred from the first quarter which was revised by the Commerce Department down to 1.1% from its initial estimate of 1.8% growth.
Inventory data released by the Department of Energy was relatively neutral. US crude oil inventories increased by 0.4 million barrels from the previous week. This was the first week in the last 3 that did not see a substantial draw of crude oil. At 364.6 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Gasoline inventories increased by 0.8 million barrels last week and are above the upper limit of the average range. Demand continued to show strength as gasoline demand increased by 3.5% on a year over year basis.
Oil prices surged nearly $2 per barrel and are poised to test resistance near the 10-day moving average at 105.81. Despite today’s reversal, momentum is negative with the MACD printing in negative territory. The MACD generated a sell signal last week and has a negative trajectory. The RSI is printing near 57, following price action higher, and reflects a neutral condition.
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