Oil prices get swept up in a Santa Claus rally as light volume a strong stock market as well as a surprise drawdown in inventory gives the illusion of strong demand. Ho, Ho, Ho! Yet we may find out that yes, Virginia, indeed this Santa rally, despite my better judgment, may be real if oil closes above $79 a barrel.
Last week the market got a bullish boost on a surprise draw down in oil supply when the Energy Information Agency, an arm of the Department of Energy, reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.9 million barrels from the previous week. That caught the market by surprise because we also saw a drawdown in the supply of distillates to the tune of 3.1 million barrels. Don’t try to reason that supply is way above normal or that most likely the draws are skewered due to bad weather conditions impacting imports because none of these justifications seem to matter. You just have to believe. You really will have to believe if oil closes above $79 a barrel.
Now some think the rally is for real because of the early blast of winter. Despite the worries over global warming, it is cold weather that is inspiring demand. In other words even though supplies are above the five year average, weather may be colder this winter than the five year average. The EIA on demand said that over last four weeks, total products supplied by refiners came in at an average 18.9 million barrels per day which was down by 1.1 percent compared to last year. For gasoline, over the last four weeks demand averaged 9.0 million barrels per day, up by 0.8 percent from the same period last year. Distillate fuel demand has averaged 3.7 million barrels per day over the last four weeks, down by 3.9 percent from the same period last year despite the fact that it was colder.....Read the entire article.
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