Crude Whipsaws but is Headed Higher

Crude oil prices whipsawed first moving higher as Brent oil prices broke through 80-per barrel and then moving lower only to rebound into the close.  There have been a number of factors that are driving prices this week. OPEC updated their forecast and are looking for stronger demand and stable supply. The IEA sees demand destruction which will be brought on by higher gasoline prices.  The Energy Information Administration reported a larger than expected draw in gasoline and crude oil, which helped buoy prices.  Geopolitics has brought on a more bullish narrative.

Technicals

Crude oil prices were unchanged forming a doji day which is a sign of indecision. Resistance is seen near the May highs at 72.30.  Support is seen near the 10-day moving average at 70.80. Short term momentum is negative as the fast stochastic generated a crossover sell signal, in overbought territory which points to a correction. The uptrend remains in place and prices are poised to test higher levels.

Imports Rose this Week

The higher run rates were counter by an increase in imports. The EIA reported that U.S. crude oil imports averaged 7.6 million barrels per day last week, up by 278 thousand barrels per day from the previous week. On average over the past month crude oil imports averaged about 8.0 million barrels per day, 4.3% less than the same month last year.

Inventories Declined

Despite rising imports stocks moved lower. The EIA revealed that U.S. commercial crude oil inventories decreased by 1.4 million barrels from the previous week. At 432.4 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Gasoline inventories decreased by 3.8 million barrels last week while distillate fuel inventories decreased by 0.1 million barrels last week. Total commercial petroleum inventories decreased by 0.7 million barrels last week.

Demand Remains Robust

Demand remain strong. The EIA reported that total products demand the last month averaged about 20.1 million barrels per day, up by 1.5% year over year. Over the last month, gasoline demand averaged about 9.4 million barrels per day, up by 0.7% year over year. Distillate fuel demand averaged about 4.2 million barrels per day over the last four weeks, up by 3.0% year over year.U.S. Philly Fed index Rose

U.S. Philly Fed index climbed

U.S. Philly Fed index climbed 11.2 points 34.4 in May, much stronger than expected, after edging up 0.9 points to 23.2 in April. It was 35.5 last May, which was a two-year high. Gains were broadbased. The employment component increased to 30.2 from 27.1, with the workweek at 34.4 from 21.6. New orders surged to 40.6 from 18.4. Prices paid dipped to 52.6 from 56.4, though prices received rose to 36.4 from 29.8. The 6-month business conditions index fell to 38.7 from 40.7, but the employment index improved to 42.8 from 34.6, with new orders rising to 40.3 from 37.2, while prices paid slid to 63.4 from 66.8 and prices received dropped to 33.6 from 47.9. This is a pretty goldilocks report again.