Crude Slips Ahead of EIA Report, API Shows Gasoline Build

Crude oil prices hit a fresh 3.5-year high on Tuesday but were no able to hold on to gains into the close. Traders took profits ahead of Tuesday’s API inventory report which will be followed by the Department of Energy’s estimate which is schedule to be released on Wednesday. The White House laid out its demand for Iran which were immediately rejected.

Technicals

Crude oil prices hit a fresh 3.5-year high, but pulled back into the close. Support is seen near the 10-day moving average at 71.41. Resistance is seen near the weekly highs at 72.83.  Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero index level with a flat trajectory which reflects consolidation.

API Reported a Surprise Gasoline Inventory Build

The American Petroleum Institute reported a draw of 1.3 million barrels of crude oil inventories for the week ending May 18, compared to analyst expectations that this week would see a draw in crude oil inventories of 1.567 million barrels. The API reported a build in gasoline inventories for week ending May 18 in the amount of 980,000 barrels, in contrast to the 1.388-million-barrel draw that analysts had expected. Distillate inventories saw a draw this week 1.3 million barrels, largely in line analyst forecasts.

Traders now await this week’s inventory report

On Wednesday the Department of Energy will release its estimate of inventory and demand. According to Platts the analysts polled forecast a fall of 1.7 million barrels in crude stockpiles, along with supply declines of 620,000 barrels for gasoline and 1 million barrels for distillate, which include heating oil and jet fuel.

The White House has laid out new demands for Iran and Venezuela

The White House has laid out new demands for Iran. It said any new nuclear deal with the U.S. would require Iran to stop enriching uranium and to pull its support for militant groups in the Middle East. Iran immediately rejected those demands. Analysts have estimated that anywhere from 400,000 barrels to 1 million barrels a day of Iran’s 2.4 million barrels a day of crude exports could be at risk.

On Monday, U.S. President Donald Trump issued an executive order “prohibiting certain additional transactions” with respect to Venezuela. In part, it bans the U.S. purchase of any debt owed to the government of Venezuela. Sanctions on Venezuela’s oil industry could intensify worries about a drop in global supply, adding to those around the Trump administration’s withdrawal from the Iran nuclear deal and imposition of sanctions on Tehran.

The U.S. Economy is Growing

U.S. May Philly Fed’s non-manufacturing sector jumped 13.5 points to 39.5 after dipping 1.6 points to 26.0 in April. This month’s level is the highest since the 46.6 from June 2015. The components were mixed with full time employment halved to 7.7 from 15.8, while part-time employment rose to 11.4 from 8.7. New orders tripled to 36.2 versus 12.5. Also prices paid increased to 33.8 compare to 26.0, with prices received climbing to 22.6 versus 12.1. The 6-month index rose 8.6 points to 50.1. This report is consistent with most of the Q2 data are showing a solid pick up in growth from Q1. Indeed, the Q2 headline index is averaging 32.8 versus Q1’s 29.7.