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Crude Oil Cannot Catch a Bid

David Becker
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Crude oil prices continue to attempt to gain traction but the overhand of inventories in the US, and the dearth of global demand has kept a lid on prices. Heating oil continues to see gains relative to crude on the heels of strong demand and relatively low supplies of distillates according to the most recent American Petroleum Institute (API) report.

According to the API, crude oil inventories increased by more than 500,000 barrels for the week ended November, 15, 2013. Analysts had forecast a decline of 500,000 barrels. The surprise build keeps crude oil stocks near the upper end of the 5-year range. The API reported gasoline stockpiles little changed, up by less than 100,000 barrels, and while distillate supplies dropped by nearly 5 million barrels. Analysts expected gasoline supplies to fall 150,000 barrels and distillate inventories to decline by 1.3 million barrels. Distillate supplies are now at the bottom end of the 5-year range and reflect the strong demand for distillates outside of the United States.

Crude oil prices are trading in a tight $3 per barrel range between $92.40 and $95.40. Resistance is near the 10-day moving average at $94.16, while short term support is seen near the recent lows at $92.37. Momentum has flattened as the MACD (moving average convergence divergence index) is printing near the zero level with the spread and the moving average of the spread at the same level. The relative strength index (RSI) is printing near 37, which is the lower end of the neutral range.

The global economic landscape shows little traction. Although the UK seems to be gaining ground the rest of the developed world is mired in slow growth while central banks are determining the appropriate measures of accommodation. Crude oil will likely stay in this tight range unless global unrest rears its head generating supply concerns.

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