Morning Futures Roundup
Despite Gyrations, Oil Volume Falls
Crude Oil surged almost five dollars over the past two sessions, lifted by ECB lending and the largest drawdown in Oil inventory levels since February 2001. The European central bank has been looser with loans lately, which may help keep European banks solvent, or at the very least, delay defaults. The move may also help the Eurozone avoid a prolonged recession, which may stabilize petroleum demand.
The EIA shocked many market observers with a 10.6 million barrel drawdown, which was well in excess of the median analyst estimate of a 2.13 million barrel draw. Products also saw some destocking, as gasoline saw a draw of 412,000 barrels and distillate inventories shrunk by 2.35 million barrels. Surprisingly, demand has been strong, increasing to 19.3 million barrels a day. Much of this can be attributed to the rise in distillate demand, which can be seen as seasonal.
While the total demand for petroleum did increase 5%, the seasonal demand from trucking during the holiday season and the heating oil demand during the winter months made up much of this demand. Also, 19.3 million barrels a day is around the medium petroleum demand figure, which is hardly jaw dropping. Crude Oil may stay between the 95 and 100 dollar levels in upcoming sessions, as many traders await next week's inventory data to give a clearer picture as to whether the massive drop in inventories was a one-off event or, possibly, the beginning of a trend.
Turning to the chart, we see the February Crude Oil contract snap back quickly after trading down to support near the 94.00 level. Prices may soon face stiff resistance just north of the $100 level. It will be difficult to sell Crude Oil bulls on a breakout above the $100 mark, as the previous four attempts have resulted in the market selling-off. A breakout above 100, however, would invalidate the double-top formation confirmed last week. The result could be a stalemate between the bull and bear camps and sideways trading. Yesterday's close above the 20 day moving average suggests that a near-term low may be in place.
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