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Oil Inventory

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The American Petroleum Institute reported that crude oil inventories fell 4.5 million barrels for the week ended August 17th, far more than the 2.5 million barrels expected. Seasonal demand and OPEC production cuts now have petroleum inventories 4.3% below average. The drop had crude oil and oil stocks moving higher, but they have since faded.

CBOE Oil Index Daily Chart

The Oil Index (OIX.X) was able to stop its May to July decline at 296, and form a head and shoulders bottom. After breaking through the neckline and 50-day moving average, the Oil Index stalled at 328.50, and pulled back to the neckline. Today the index is once again trying to move higher, but has stalled at 325. To keep moving to the upside, OIX is going to have to take out a cluster of resistance around 325, and then punch through 332. Crude oil demand will have to remain strong into the fall and inventories will have to continue to drop for oil stocks to continue to perform.

Oil Service Index Daily Chart

The Oil Service Index (OSX.X) hasn't gotten quite the same pop. The index is still holding above support, but has given up most of today's gains, and is now down .17. 94.4 has been recent resistance, but based on today's performance, oil service may have to focus on holding above support.

October Crude Oil Futures Daily Chart

October Crude Oil futures (CL01V) are trying to form their own head and shoulders bottom, but have stalled at the right shoulder. Granted both moving averages and the 50% retracement are trying to hold prices back, but futures shouldn't have given up all of today's gains if the report was that bullish. Perhaps it was a good old fashion buy the rumor sell the news. Either way, it looks like crude might have a hard time cracking $27.39.

Perhaps traders are taking some of their profits in crude this morning, and putting it to work in stocks. The Dow is up 110, and the Nasdaq is higher by 18.

Jeffrey Canavan Assistant Analyst

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