Crude rallied for 4th straight session, logging 12-day high of 62.49, rebounding after a sharp drop that saw prices decline nearly 13% after hitting highs in January near 66.65. Inventories continued to be mixed a robust increases in U.S. production has offset continued declines in imports especially from Saudi Arabia.
Technicals
Crude oil prices closed above former resistance now support near the 10-day moving average at 61. Resistance is now seen near the January highs at 66.66. Momentum is positive, as the fast stochastic continues to move higher following a crossover buy signal generated mid-last week. The MACD is also ready to generate a crossover buy signal. The MACD index is poised to cross above the MACD signal line.
Production is Offsetting Imports
The Energy Information Administration reported that U.S. crude oil inventories increased by 1.8 million barrels from the previous week. This was less than expectations. At 422.1 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Generally, expectations would be for a quicker accelerating in the decline in crude oil inventories.
Gasoline inventories increased by 3.6 million barrels last week, more than expectations. Distillate fuel inventories decreased by 0.5 million barrels last week in line with expectations. Total commercial petroleum inventories decreased by 2.7 million barrels last week.
Demand is Solid
Demand remains very strong. The EIA reported that total products demand over the last month averaged 20.7 million barrels per day, up by 6.9% from the same period last year. Over the last four weeks, gasoline demand averaged 9.0 million barrels per day, up by 6.5% from the same period last year. Distillate fuel demand averaged over 4.0 million barrels per day over the last four weeks, up by 6.3% from the same period last year.
Sentiment Bounced
The Michigan sentiment bounce to 99.9 from 95.7 in January brought us back toward the 13-year high of 100.7 in October, and above the previous 13-year high of 98.5 from January of 2017. Friday’s rise narrowed the recent under-performance of Michigan sentiment relative to other confidence gauges. The IBD/TIPP index popped to a 56.7 new cycle-high from 55.1 in January and 51.9 in December. The weekly Bloomberg Consumer Comfort index surged to a cycle-high 57.0 in the second week of February, versus a prior cycle-high of 54.6 in the last week of January, leaving a rise in monthly averages to the 55.3 area from a 53.9 prior cycle-high in January. February consumer confidence should rise to 127.0 from 125.4 in January and 123.1 in December, versus a 17-year high of 128.6 in November. There is modest upside revision-risk for the final February Michigan sentiment figure given an upward trend in available monthly and weekly measures. There was a 1.3 boost in the final January report. We saw a 0.2 average downward revision in 2017, but average upward revisions of 0.1 in 2016, 0.4 in 2015, 0.6 in 2014 and 1.8 in 2013.