Crude Hits Four-Month High on Inventory Speculation

by on May 20, 2014 6:57 am BST

West Texas Intermediate (WTI) crude hit a four-week high on speculation that inventories at the hub in Cushing, Oklahoma would retract for the 15th of the last 116 weeks. At $102.325 per barrel, crude futures are moving higher in low-volume trade.

Tim Evans, Citi Futures Perspective, said “inventories are at the lowest level in more than five years at Cushing and may continue to decline.” Analysts forecast inventories will continue to decline due to the southern portion of the Keystone XL pipeline began to transport crude to the Gulf Coast refineries from the Cushing storage hub. Inventories at Cushing have fallen 44 percent since late January. Evans believes there will be a lot of short covering due to soured bets of lower prices prior to the June contract expiring.

WTI has seen some geopolitical demand as risk premiums continue to support black gold. Russian President Vladimir Putin said he ordered troops back to bases and away from the Ukrainian border. NATO does not believe this to be the case.

Price action will likely find some minor resistance at $102.425 before testing $102.671 prior to the Energy Information Administration (EIA) inventory data this week. However, a pullback to support at $102.15, possibly $102, is a likely scenario before traders can digest the new information.

If the inventory data disappoints, crude is trade lower $101.745.

4H Chart of QM

4H Chart of QM