Crude Oil Declines From Five Month High Before U.S. Government Supply Report

Crude oil fell from a five month high before a government report that may show U.S. crude supplies rose last week while traders bet that crude’s rally made the commodity too expensive. Crude earlier reached its highest price since May 4 after a report yesterday showed U.S. gasoline inventories dropped last week by the most since May 2009. The Energy Department may say today crude supplies rose by 413,000 barrels, a Bloomberg News survey shows. Oil’s 14 day relative strength index rose above 70, a sign that prices may drop after rising too far, too fast.

“There is some optimism in the market that inventories are decreasing and the oversupply is shrinking,” said Sintje Diek, an HSH Nordbank analyst in Hamburg. “This is an overreaction by the oil market. The higher prices are not sustainable.” Crude for November delivery traded at $82.71 a barrel, down 11 cents, or 0.1 percent, on the New York Mercantile Exchange at 1:08 p.m. London time. It earlier climbed as much as 51 cents to $83.33 a barrel. Brent crude for November settlement traded at $84.71 a barrel, down 13 cents, on the ICE Futures Europe exchange in London.

New York futures rose 1.7 percent yesterday after the Institute for Supply Management’s index of non manufacturing businesses, which covers about 90 percent of the U.S. economy, climbed to 53.2 from 51.5 in August. Economists surveyed by Bloomberg News projected the index would advance to 52. Crude’s 14 day relative strength index, a measure of how fast prices have risen or fallen in that period, was at 70.1 today. A reading of 70 or more can be taken as a sign that a market is “overbought” and prices may drop......Read the entire inventory report.


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