Crude Oil Price Analysis for December 21, 2017

Crude oil prices were trading at the top end of their recent range on Wednesday following the Department of Energy’s release of its inventory and demand data. What is clear is that U.S. shale producers are increasing their oil production which is more than being offset by declines in imports. Total petroleum inventories tumbled by more than 14-million barrels this past week. Demand was strong across the board, but heating demand was down slightly year over year. Refiners are operating at elevated levels, which is drawing crude oil from stocks, as products, such as heating oil and gasoline are being consumed or exported.

Technicals

Crude oil prices cleared through the 58-handle, and is forming a bull flag pattern which is a pause that refreshes higher. Short term support is seen near the 10-day moving average at 57.28. Resistance is seen near a downward sloping trend line that comes in near 58.50. Additional support below the 10-day moving average which is an upward sloping trend line that comes in near 56.50. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with an increasing trajectory which points to higher prices.

API Reported a Large Draw

Prices were buoyed ahead of the IEA report as API data showed a bigger than expected 5.2-million-barrel decline in U.S. crude inventories in the latest reporting week. This has helped offset market expectations for U.S. crude supply to rise to record levels above 10 million barrels per day in the coming months, which roughly match production out of Saudi Arabia and near Russian’s 11 million barrel per day production level.

Refineries are Drawing Crude and Running at Hot Levels

The EIA reported that U.S. crude oil refinery inputs averaged about 17.1 million barrels per day during the week ending December 15, 2017, 111,000 barrels per day more than the previous week’s average. Refineries operated at 94.1% of their operable capacity last week, more than 3% more year over year.

Imports are Declining and Inventories are Dropping

Over the last month, crude oil imports averaged over 7.4 million barrels per day, according to the Energy Information Administration, 6.2% less than the same period last year. Distillate fuel imports averaged 380,000 barrels per day last week.

Inventories Declined

The dearth in imports allowed U.S. crude oil inventories to decrease by 6.5 million barrels from the previous week. Gasoline inventories increased by 1.2 million barrels last week, and distillate fuel inventories increased by 0.8 million barrels last week but are in the lower half of the average range for this time of year. Total commercial petroleum inventories decreased by 14.2 million barrels last week.

Demand remains solid. Total products demand over the last month averaged 20.3 million barrels per day, up by 2.6% from the same period last year. Over the last month, gasoline demand averaged over 9.0 million barrels per day, up by 0.4% from the same period last year. Distillate fuel demand averaged 4.0 million barrels per day over the last four weeks, down by 1.2% from the same period last year.

This article was originally posted on FX Empire

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