Wednesday, August 25, 2010

Crude Oil Inventories & Commentary

Oil is falling sharply in reaction to large builds in weekly inventory data. Oil stocks rose 4.1 million barrels with gasoline stocks up 2.3 million and distillates up 1.8 million. The data are for the August 20 week.

Gasoline demand slowed to a 3.0 percent year-on-year pace vs. 3.5 percent and 3.3 percent in the prior weeks. Distillate demand has been slowing abruptly for nearly two months, now at plus 4.9 percent year-on-year. Supply has been heavy the past year but signs of trouble on the demand side may now begin to shift the picture for oil which has been narrowly rangebound all summer.

Has Crude finally found a bottom to this downtrend? It is hard to say. To quote Alex, " 50/50 chance crude ticks up." I do concur. Supply levels of NYMEX WTI are out of control. However, as long as emerging markets demand remains robust, crude should not fall below $65/b. I need to see price movement above the $75-76 line before I turn bullish once again. For now the tape is range bound. Until supply witless down and the EUR/USD pops, I expect crude to trade between $70.50 -$74.

In case anyone was wondering, I was stopped out of My USO calls. Extremely poor trade on my behalf. At least I learned a valuable lesson. Don't buy calls without protection. I will be trading futures for the foreseeable future.

Related ETFs: PowerShares DB Crude Oil Dble Long ETN (DXO), UltraShort Oil & Gas ProShares (DUG), iPath S&P GSCI Crude Oil Ttl Ret Idx ETN (OIL)

Sports: Team USA smacked Greece 87-59. Eric Gordon led the way with 18 points, 4-7 from the promise land.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

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