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Crude Oil Sell Off on Profit Taking

By:
Barry Norman
Updated: Aug 21, 2015, 01:00 UTC

Crude oil prices were up on Thursday as lower inventories supported the prices but the US budget talks kept investors cautious. Investors feared that US

Crude Oil Sell Off on Profit Taking
Crude Oil Sell Off on Profit Taking
Crude Oil Sell Off on Profit Taking

Crude oil prices were up on Thursday as lower inventories supported the prices but the US budget talks kept investors cautious. Investors feared that US lawmakers may fail to avert the automatic tax hikes and spending cuts which would send the US economy into recession. Crude oil prices to be down as a stronger dollar will keep investors away thus pushing prices further down.

Oil markets have enjoyed support from the news of progress on the fiscal cliff, dollar weakness and intention from traders to return to riskier assets. As a result, WTI oil price rose a by 1.8% to $89.51 per barrel and Brent oil rallied by 1.4% to $110.36 per barrel. Thus, the difference between Brent and WTI moderately narrowed to $20.85/bbl. On a monthly basis, WTI rose by 0.7% but Brent slipped by 0.8%.

As the day progressed negotiations between the White House and Congressional leaders broke down changing market sentiment universally. By late in the day in the US, traders were moving amass to safety or leaving markets. With pressure ahead of the yearend tax changes investors are selling off profitable trades to book profit before the new tax year.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the previous week and against expectations for a fall of 800,000 barrels. At 371.6 million barrels, U.S. crude oil inventories are well above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.2 million barrels last week and are above the upper limit of the average range.

Fundamental data in the US helped support prices after eco data showed that manufacturing in the Philadelphia region unexpectedly expanded in December to an eight-month high, reflecting pickups in sales and orders that signal the industry is starting to stabilize. The U.S. economy grew at a 3.1 percent annual rate in the third quarter, more than previously reported, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap. Existing house sales soared to their highest rate since 2007 well above forecast.

Crude broke above 90.00 after the late day eco releases, and then late day sentiment changes pushing the US dollar off its lows, gold tumbled and currencies fell as traders sought safety and turned from risk. Crude oil dipped in the morning trading by about 1.00usd as traders took profits and exited the markets ahead of the holiday. Crude climbed for several days this week lifting off lows of 85.00.

U.S. natural gas futures were up on Thursday as inventories came lower than expected. Traders can expect Natural Gas prices to go up as a colder weather outlook can boost the heating demand and support the prices further. Accuweather is now forecasting a cold spell for the holidays increasing residential demand. Front-month gas futures NGc1 on the NYMEX ended up 14.2 cents, or 4.3 percent, at $3.462 per million British thermal units after climbing to an intraday high of $3.467 late in the floor trading session. Following traders mood, they dumped NG in the early Asian session and took profits and left the market. Natural Gas is trading at 3.438 off by 0.017.

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