Energy Futures Update

Crude Oil tested the lows yesterday once again, however still remains above support. We see this as significant, and a major indicator that prices are heading higher.

The weekly inventories was a mixed bag of tricks. However, the headline number for this round of the publication, namely the gasoline numbers, showed a draw of -3450k versus an expected draw of -2000k. With much of the focus drawn towards refinery utilization and gasoline supplies for the up-and-coming driving season, the market was pessimistic ahead of this number, however the extent of the draw surprised some traders.

More importantly though, inventories across the entire energy complex have been declining steady over the past six months and have now fallen by more than 100 million brls, a decline that is about "three times faster than the normal seasonal pattern". Some of the bullish flows into the market are adopting a simplistic but effective approach to the market, seen as being in a chronic bear mode on inventories and a higher demand side pull to consumption.

We are long from the lower end of the daily distribution at 59.375 with a target at 61.00 & 61.75. There is a possibility that this could be the lower end of a longer term rally in Crude, if you study a weekly chart, however we have yet to see a confirmation of this.

So those who are looking to catch the shorter term rally, then any setback below 60.00 remains a good level for longs.