Oil prices fall on a mixed inventories report

Oil prices fell on Wednesday afer the Energy Information Agency gave a mixed inventories report.  Oil prices fel $1.58 to settle at $124.22 a barrel on the New York Mercantile Exchange.  The EIA report said crude oil inventories rose by 200,000 barrel last week, now sitting at 325.8 million barrels of oil.  This was less than the 2.25 million barrel rise analysts were expecting.  Supplies have now increased 12.1 million barrels over the past four weeks.

 

Heating oil futures fell 8.11 cents to settle at $3.6178 a gallon after the EIA report showed distillate inventories grew by 1.4 million barrels.  Analysts were expecting a smaller increase.  Currently the supply is listed at 107.1 million barrels.

 

Gasoline futures fell 1.96 cents to settle at $3.1804 a gallon after the EIA report said supplies fell by 1.7 million barrels.  Analysts had been expecting a decline of only 800,000 barrels. Stock piles now include 210.2 million barrels of gasoline inventories.

 

June natural gas futures rose 17.6 cents to settle at $11.589 per 1,000 cubic feet.  Independence Hub, a major Gulf of Mexico natural gas platform, said the platform closed in April due to a leak will not reopen until next month.  The initial leak has been repaired but another small leak still needs fixed.  The loss of the the platform has removed 900,000 cubic feet of production.  The facility has the potential to produce up to 1 billion cubic feet per day.  The EIA is supposed to release its weekly natural gas inventories tomorrow.  It is expected to show an increase of 85 billion cubic feet.

 

Refinery utilization jumped last week, up 1.6 percent to 86.6%.

 

Demand for gasoline was reported to have dropped slightly as well.

 

Meanwhile prices at the pump continued to climb to new records overnight as the national average price for gas rose 2.6 cents to $3.758 per gallon.  Gas prices are now 67 cents higher than a year ago.  It looks like they will continue to rise until at least the Memorial Day weekend.  Diesel prices also set another new record high, closing at $4.419 per gallon.

 

"We've seen the crack spread widen materially in the last two weeks, which should encourage more gasolina production over the coming weeks as refiners see better profit margins," Thomas Hartmann, an analyst at Altavest Worldwide Trading said.

 

For the second day in a row the dollar strengthened against major currencies.  Also on the news front the consumer price index increased by just 0.2% in April while the core index increased just 0.1%.  The reading on inflation was a bit weaker than expected.

 

A group of Democratic senators want to make a massive arms sale to Saudia Arabia contingent on getting cheaper oil.  The arms package is woth some 4$20 billion dolars.  The group has introduced a resolution in the Senate to block the pending sale.

 

Imperial Oil, Canada's largest oil company, lost a legal bid to overturn a federal regulatory decision which could delay a planned C$8 billion($7.98 billion) oil-sands project in Alberta for a year.

 

No group has claimed responsibility for an attack on a Nigerian vessel.  The attackers had asked for a ransom of 30 million naira($259,000) for the hostages' release after hijacking a boat carrying supplies for the US oil group Chevron.  9 Nigerians a Portuguese and a Ukranian were al being held hostage by their kidnappers.

 

In 2007, more than 200 foreign workers were taken hostage, often being released after a ranson was paid.

 

Oil's relative strength slipped back slightly to 65%.  The 20 day moving average climbed to $119.20 while the 50 day moving average climbed to $111.17.  As expiration draws closer open interest continues to drop for the June contract.  Volume decreased to 289,528 contracts and the open interest continued to decline as well, finishing the day with 217,333 open June contracts.  Over all contract time periods volume dropped for the second day in a row down to 553,272  while the total number of open contracts climbed to 6,713,419.

 

It appears we should see oil settle near its high end tomorrow.  This could be considered either a tight day of trading or a nice rise in prices is coming tomorrow.  The relative strength still is suggesting a contraction should be seen so we may end the day with a tight trading range.