Weekly petroleum recap, crude oil inventories up

Strength in the US dollar, along with mild weather and a greater than expected increase in crude oil inventories put a cap on the petroleum markets during the week which had WTI settle down slightly more than $1 per barrel to $79.98.

Mild weather this month has cut the need for heating oil whose stockpiles typically decline from November to March as demand for heating products usually exceeds domestic supply. Over the past 2 weeks, above normal temperatures covered most of the eastern region of the US, additionally from March 30 through April 8, the weather is supposed to be above normal for the eastern part of the United States.

The recent correlation between the dollar and the petroleum complex has held up very well during the past few months. The strength in the dollar is creating less demand for assets priced in dollars which include most commodities including benchmark petroleum products and crude oil.

Imports played a large role in the greater than expected build in crude oil this week. U.S. crude oil imports averaged 9.4 million barrels per day last week, up 969 thousand barrel per day from the previous week, which showed up in builds in the gulf coast region. U.S. commercial crude oil inventories increased by 7.3 million barrels from the previous week. Most analyst had expected a build of 1-2 million barrels. At 351.3 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year, and the trajectory continues to climb.

On the demand side, total products supplied over the last four week period have averaged 19.4 million barrels per day, up by 3.6 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged 9.0 million barrels per day, up by 1.2 percent from the same period last year.

Technically, crude oil looks like it has formed a third top or a shoulder and could fall precipitously to support levels near 77.50 which are the 50 and 100 day moving averages. Most likely, traders will refrain from short positions ahead of next week’s employment number.

Tags:  crude, dollar, markets, oil, petroleum, US