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Despite another increase in crude oil and gasoline supplies, it looks like value-seeking buying was strong enough to turn gasoline prices higher for the week while limiting the downside price action in crude oil.
The relatively powerful rebound rally in unleaded gasoline as it neared the contract low should be noted because it serves as further proof that we are in a trading range and are likely to stay there until OPEC makes its decision on production on December 4.
Profit-taking and short-covering were likely the major drivers of the price action, but there may have been some speculative buying due to technically oversold conditions. Additionally, if you are a contrarian speculator, you may have been driven by statements from the auto club AAA: “Now that oil prices are falling again, pump prices should get even cheaper as we approach the holiday travel season.” These types of statements tend to occur near bottoms because they are based on stale news.
Whatever the reasons, January Gasoline futures are in a position to post a strong enough reversal on the weekly chart to hold the market inside its late August to early November price range. It may even produce enough upside momentum to drive prices back to the mid-point of this range.
Besides the weekly supply and demand news from the U.S. Energy Information Administration, speculators should note that the August bottom occurred…