Oil Near One-Month High

Bloomberg:
Crude oil traded near a one-month high in New York as gains in U.S. equities restored confidence that fuel demand will increase.

Oil earlier extended yesterday’s 2.4% jump after the dollar index dropped 1.7 percent in the past two days, increasing the appeal of commodities as an inflation hedge. The Dow climbed 2.1% while the S&P 500 gained 2.4%.

Crude oil for July delivery was at $76.92 a barrel, down 2 cents, on the NYMEX at 10:52 a.m. Singapore time. The contract surged $1.82 yesterday to $76.94, the highest closing price since May 6. Futures are up 9.2 percent from a year ago.

Crude broached a closely watched pricing point yesterday, closing above the 200-day moving average of $76.94 a barrel for the first time in a month.

Oil’s gains yesterday were tempered after the industry- funded American Petroleum Institute reported that U.S. crude-oil stockpiles rose 579,000 barrels to 358.7 million.

The Energy Department will probably report that U.S. gasoline inventories were little changed last week, the Bloomberg News analyst survey shows. Stockpiles of distillate fuel, a category that includes heating oil and diesel, are forecast to climb 1 million barrels. The department is scheduled to release its weekly report at 10:30 a.m. EST.

Thoughts:
At the moment, I am leaning toward being bullish on crude until the end of the summer. However, I do not want to make a definite stance until I can find more information relating to supply. I am convinced that demand will continue to grow in the U.S., due to increased gasoline usage during the summer and slow economic recovery, and in emerging economies, due to continued economic growth. If supplies show strong signs of decline, then crude will continue its rally.

Daniel A.
Summer Analyst
Analyze Capital LLC