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Heating Oil Buoyed Despite Crude Oil’s Decline

David Becker
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Heating Oil prices edged lower on Wednesday pulled down by crude oil which was under pressure after the release of two inventory reports. Prices have declined as supply in the US continues to overwhelm demand which is evident by observing 10 consecutive stock builds in crude oil which have pushed inventories well above the 5-year average range.

On Tuesday evening after the close the American Petroleum Institute reported that U.S. crude stocks rose by 6.9 million barrels in the week ended November, 22, 2013. Expectations were for a drop of 1.5 million barrels, according to a survey of analysts. API reported that stockpiles of gasoline rose just 201,000 barrels against a forecast increase of 1 million barrels. Distillate supplies fell 1.7 million barrels, compared to analysts’ expectations of a decline in distillate inventories by 1.3 million barrels.
The EIA released its inventory data on Wednesday which showed that crude oil built stocks for the 10th consecutive week. According to the Energy Information Administration, U.S. commercial crude oil inventories increased by 3.0 million barrels during the previous week. At 391.4 million barrels, U.S. crude oil inventories are well above the upper limit of the average range for this time of year. Gasoline inventories increased by 1.8 million barrels last week and distillate fuel inventories decreased by 1.7 million barrels last week. While crude oil continues to build the demand for distillates is generating significant draws.

Hedge fund traders in the prior week reduced short position in WTI crude oil as the petroleum market consolidated in a tight range. According to the commitment of traders report released for the week ending November 19, 2013, managed money reduced short position in crude oil futures and options by 11K contracts while increasing long position by approximately 1500 contracts. The recent price action below support should reflect increasing shorts in the current week.

Heating Oil could remain buoyed despite the negative impact from crude oil. Next weeks employment report will go a long was to determining the direction of the petroleum complex.

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