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Crude Oil Rally’s Technical’s are Positive

David Becker
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Crude oil prices moved higher during the past week as inventories declined more than expected, despite remaining at the top end of the current range. The robust demand globally for distillates seem to be offsetting the strong production seen in the United States, generating a push and pull on the oil complex.

The short term breakout in crude oil prices stem from this week’s decline in stocks as reported by the Department of Energy this past Wednesday. According to the Energy Information Administration, US crude oil inventories dropped 7.7 million barrels last week. At 350.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Obviously the rally is a function of the trajectory. Given the high production levels, crude oil draws could buck the seasonal trend and decline to the bottom end of the range if production trumps demand.

Additionally this week, gasoline inventories increased by 6.2 million barrels while distillate fuel inventories dropped by 1.0 million barrels and have moved below the lower limit of the average range for this time of year.

WTI is edging above short term resistance but will likely face a test when it hits the 50-day moving average near $95.72. support is seen near the 10-day moving average at $93.10. Momentum is changing and the MACD is poised to generate a buy signal. This occurs when the spread crosses above the 9-day moving average of the spread. The RSI is accelerating higher which reflects increasing momentum on the February contract.

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