Crude oil retreated early in the trading season Wednesday on anticipation of the release of DOE inventory numbers. According to recent surveys, forecasts are expected to show a build in crude supplies of 1.2-2 million barrels, while gasoline stocks are set to decline 2.5 million barrels.
This a day after both reached and closed at record levels. Crude oil futures closed at $119.17, after an intraday high of $119.90 a barrel. The current contract for June delivery closed at $118.07 a barrel. Looking out in the future, we see all long-dated oil contracts over $100 a barrel, illustrating the troublesome supply/demand fundamentals.
How to trade this market..?
Look for another surprise draw in the inventory data, leading to higher prices.
The long-term fundamentals are still in play. Global demand continues to rise in the face of the precipitous increase in prices with no sign of future demand deconstruction. On the supply side, currently we are suffering the constant disruptions from; Nigeria, Iraq, Mexico, Russia, etc, and future supply is in jeopardy due to LACK of REinvestment in oil and gas industries. We have seen a continual decrease in oil production from countries like Mexico, Venezuela, and even Russia due to deterioration in drilling platforms from lack of maintenance.
Moreover, we have seen an influx of investment from pension funds and commodity index funds, which tend to invest for the long-term.
All factors adding to the outlook on higher oil prices.
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