June Crude Oil futures rallied earlier this week, taking out the psychological $60.00 level in the process. The rally was triggered by a price hike by Saudi Arabia, a protest at a key Libyan port and thoughts that U.S. inventories had finally leveled off.
The news from Saudi Arabia was light this week, but one event did help underpin the market. The Saudis announced that it had raised its official selling prices for its Arab Light grade crude to the United States and Northwest Europe. The move was based on stronger demand in those two areas.
Another event that helped support higher prices was the stoppage of crude flows to the eastern Libyan oil port of Zueitina by protestors. This move hampered exports. This was a key event because Zueitina is one of the few Libyan ports still exporting oil. Unlike the events in Yemen that are still being watched while having no effect on supply, a shutdown of Zueitina will have an effect on supply. At this time, Libyan oil output is under 500,000 barrels per day which is well below what it pumped just five years ago. Taking out Zueitina while not a major event, does limit output further.
This week’s U.S. Energy Administration inventory report for the week-ending May 1 showed that crude oil inventories fell 3.9 million barrels. On paper, this was a bullish number because traders had been looking for a slight rise of 1.3 million barrels. This news triggered a spike in oil prices that was met with heavily resistance,…