Oil prices surge to new high after supply report

Oil prices settled at another new high closing up $4.19 at $133.17 a barrel on the New York Mercantile Exchange.  It was the largest one-day preice advance since March 26th.  It reached an all time high of $134.15 during the trading session.

 

Gasoline prices at the pump reached another record up 0.7 cents overnight to $3.807 according to AAA and the Oil Price Information Service.  Meanwhile gasoline futures rose 9.21 cents to settle at $3.3965 a gallon after trading as high as $3.4081.

 

Diesel fuel rose 1.9 cents to $4.558 a gallon and heating oil futures rose 13.34 cents to settle at $3.9084 after trading as high as $3.9187

 

Natural gas futures rose 27.5 cents to settle at $11.64 per 1,000 cubic feet.

 

In its weekly look at crude oil inventories the Energy Department said today that crude oil inventories dropped 5.4 million barrels this past week to 320.4 million barrels.  Analysts were expecting a rise of 900,000 barrels for the week.  The sharp decline was dueto a substantial decline in imports.

 

Crude oil imports averaged 9.2 million barrels a day last week, down 696,000 barrel per day a week earlier..  Crude imports were down and are 1.6 million barrels below the same week last year.

 

Gasoline supplies feel 800,000 barrels last week to 209.4 million barrels.  Distillate stocks were up 700,000 barrels at 107.8 million barrels.

 

Refinery utilization rose to 87.9% of capacity from 86.6% a week ago.

 

American Airlines said today that it would scrap 75 planes from its fleet and will reduce the number of seats available on domestic routes by between 11% and 12% this year.  It said it would also impose a $15 charge for checking in bags, although this will not be levie on international passengers.

 

Each $10 increase in the price of a barrel of oil increases airline expenses by $800 million.  Since the beginning of the year the commodity surge has raised the airline's annual costs by $3 billion.

 

Relative strength climbed once again closing at 82%.  The 20 day moving average for the front month contract climbed to $121.59 and the 50 day moving average climbed to $112.93.  Volume picked up to 348,997 up over 50,000 shares from yesterday.  Open interest climbed to 389,257 open July contracts.  For all months volume was up 85,000 contracts to 692,458 and open interest was up over 30,000 contracts to 5,551,003 open contracts.

 

Many are starting to talk about the speculative bubble.  I have been saying this as well for quite some time.  Some are starting to suggest that when this bubbles pops prices will fall quick and steep.  I continue to see prices climb as long as money keeps on pooring into the market.  Once funds stop buying commodities the prices will drop like a rock.  Everything is WAY overbought right now and a correction is coming.  It won't be pretty.