Crude Oil Price Analysis for February 26, 2018

Crude oil prices surged higher on Friday climbing more than 1.3% and notching up a solid 3% gain for the week. A surprising drop in crude oil inventories along with a decline in U.S. production paved the way for higher prices. Demand remains robust for nearly all products, including gasoline and diesel fuel.

Technicals

Crude oil prices surged higher Friday, and are poised to test target resistance near the February highs at 66. Support on crude oil prices are seen near the 10-day moving average at 61.12.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line(the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices for crude oil. The relative strength index (RSI) moved higher with price action reflecting accelerating positive momentum.

Inventories Unexpectedly Declined

U.S. commercial crude oil inventories decreased by 1.6 million barrels from the previous week. At 42 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year Total motor gasoline inventories increased by 0.3 million barrels last week and are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week Distillate fuel inventories decreased by 2.4 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 2.5 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by million barrels last week.

Demand Remains Strong

Total products demand over the last four week period averaged 20.0 million barrels per day, up by 4.3% from the same period last year. Over the last four weeks, motor gasoline demand averaged 9.1 million barrels per day, up by 5.4% from the same period last year. Distillate fuel product supplied averaged over 4.1 Million barrels per day over the last four weeks, up by 4.3% from the same period last year. Jet fuel product supplied is up 6.7% compared to the same four week period last year.

Refinery Runs Seasonally Declined

U.S. crude oil refinery inputs averaged about 15 million barrels per day during the week ending February 16, 2018, 329,000 barrels per day less than the previous week’s average. Refineries operated at 88 % of their operable capacity last week. Gasoline production increased last week, averaging 10 million barrels per day. Distillate fuel production decreased last week, averaging over million barrels per day.

Crude Oil Imports Declined

U.S. crude oil imports averaged over 7.0 million barrels per day last week, down by 867,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.8 million barrels per day, % less than the same four week period last year. Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 350,000 barrels per day. Distillate fuel imports averaged 43,000 barrels per day last week.

The American Petroleum Institute reported an unexpected small draw

The American Petroleum Institute reported an unexpected small draw of 907,000 barrels of United States crude oil inventories for the week ending February 16. Analysts had expected a small build of 1.333 million barrels in crude oil inventories, instead. Last week, the American Petroleum Institute reported a build of 3.947 million barrels of crude oil, along with a build in gasoline inventories of 4.634 million barrels. This week’s data is more optimistic, with the API reporting not only a surprise draw for crude oil, but a modest gasoline build of 1.468 million barrels, which was largely in line with analyst forecasts that had the build pegged at a 1.229-million-barrel build.