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Crude Oil has suffered in 2014

David Becker
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The new year started with a thump as commodity investors faced the wrath of pent up selling pressure that was ignited by traders who were looking to take profit, but did not want to book their gains in 2014. Tightening interest rate conditions, along with robust crude oil inventories are likely to keep petroleum prices under pressure during the first month of the New Year.

Inventory levels of crude are declining rapidly. U.S. commercial crude oil inventories decreased by 7.0 million barrels from the previous week. At 360.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Gasoline inventories increased by 0.8 million barrels last week, and are in the upper half of the average range. Distillate fuel inventories increased by 5.0 million barrels last week but are below the lower limit of the average range for this time of year.

Demand has also picked up. Over the last four weeks, motor gasoline demand averaged about 8.9 million barrels per day, up by 3.5% from the same period last year. Distillate fuel demand averaged over 3.7 million barrels per day over the last four weeks, up by 1.3% from the same period last year.

The technical damage to crude oil has been nasty. Prices sliced through support near the 20-day moving average which is now considered resistance near 98.11. The first target for support is seen near an upward sloping trend line that connects the lows in April to the lows in November coming in near $93.40. The next level of support following the trend line is seen near 92.00.

The trend has turned negative as the 50-day moving average has of crude prices has crossed below the 200-day moving average which is known as the “death cross”.

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