Crude Oil Breaks 90 While Natural Gas Breaks Down

WTI crude oil ended at a two-week high, with traders watching the ebb and flow of optimism in talks over avoiding the “fiscal cliff”.  The American Petroleum Institute reported earlier in its weekly data that crude oil stocks fell 4.099 million barrels last week, as refiners boosted operations by 1.1 percentage point. The trade group said distillate stocks fell 1.877 million barrels, while gasoline stocks rose 4.176 million barrels. . According to a survey of analysts and traders by Dow Jones Newswires, the EIA inventory data was expected to show a decline of 900,000 barrels in distillate stocks (diesel/heating oil) and a rise of 1.5 million barrels in gasoline inventories.  The actual inventory released by the EIA showed a decrease in stock by 1million. Traders immediately pushed oil upward to break above 90.00 but were unable to sustain the price and fell to trade in the low 89.64 price this morning. The US dollar traded weakly yesterday helping to support oil prices increase.

A little-noticed provision in U.S. sanctions against Iran beginning in February is likely to trap payments abroad for its oil exports running into billions of dollars, sapping Tehran of revenue needed to fund the government. With embargos and sanctions tightening, Iran is more willing to come to the table for talks as rhetoric has turned down over past week.

The sudden growth in U.S. oil and natural gas production could eventually lead to a shift in relations with the Middle East as the United States becomes a net exporter of energy, President Barack Obama said in an interview published yesterday, this will also reduce the need for the US strategic reserves.

Crude oil is looking at major increases in production as OPEC will have less say in the global production and an energy independent nation, will have more control over pricing and exports. This shift will have particular consequences on our allies and our political positions in the gulf region.

Tensions in the Middle East also continue to raise supply concerns and pushed the prices higher. We expected Crude oil prices to be up as positive numbers for US manufacturing index today can also boost the prices.

U.S. natural gas ended lower on Wednesday weather forecasts was moderated thus affecting the heating demand for residential use, though traders and speculators have been playing with the prices to buy and sell rapidly. Expect Natural Gas prices to go up as lower inventories expected today can support the prices. Natural gas is trading this morning at 3.339 flat in the early session.