Crude Oil Outlook
June Crude Oil futures remained firm last week as the market flirted with the psychological $60.00 price level. The market was supported by supply news out of Cushing, Oklahoma, global demand news from the Saudis and a positive technical chart pattern.
This week’s U.S. Energy Information Administration report showed a much needed drawdown at Cushing, Oklahoma. This marked the first decline in inventories since November and it alleviated some of the fear that the U.S. was running out of storage space.
According to the EIA data, stockpiles at Cushing, the delivery hub for NYMEX crude oil, slipped 514,000 barrels to 61.7 million last week. This could be a sign that supply is finally leveling off and it relieves some of the worries that the key delivery point was close to reaching maximum capacity.
Bullish investors were relieved by the news out of Cushing because reaching full capacity would have been an extremely bearish event. The news caused some light short-covering and encouraged further speculative buying.
As of April 17, Cushing supplies were sitting on a record 62.2 million barrels. This was close to the hub’s working capacity of 70.8 million. The decline in inventory was also the first in 20 weeks. Just like the reduction of drilling rigs became the key market driver for several weeks, traders are now going to turn their focus on the further reduction of supply at Cushing each week. It may take 3 or 4 weeks…