July Crude Oil futures finished the week sharply higher, driven by a government report which showed a large drop in crude stockpiles, surprising analysts who were looking for a small increase.
Light, sweet crude for delivery in July gained about $2.71, or 2.6% for the week to $104.29 a barrel on the New York Mercantile Exchange, the highest close since April 21.
On Wednesday, May 21, the U.S. Energy Information Administration reported domestic oil stockpiles fell 7.2 million barrels in the week-ended May 16. This was the biggest weekly decline in more than four months. According to The Wall Street Journal, expectations were for an increase of 700,000 barrels. Traders cited a drop in imports of crude to a 17-year low as the main reason for the decline.
The reason for the drop in imports to an average of nearly 6.5 million barrels per day was the surging U.S. oil production that has reduced the need for foreign crude. Although the news drove the market higher this week, next week could be completely different since a one-week decline in imports is not a trend. Next week’s data could produce bearish news especially if domestic production adds to the near record supply.
Nonetheless, bullish speculators should continue to watch the import number on a weekly basis besides the raw supply and demand data because this could become a trend that triggers a sharp rally. Although some analysts are dismissing the surprisingly large drop that could easily be…