$145 Oil, Do I Hear $150?
August Brent Crude futures hit $145.01 in Asian trading early Thursday morning. Since Brent is not normally the price leader that suggests the U.S. contract for light crude will continue to move higher on Thursday. As of 10:ET the U.S. crude contract was $144.38 and rising.
The EIA inventory report Wednesday morning showed crude inventories fell for the sixth time in seven weeks. Crude oil inventories dropped by -2.0 million barrels to 299.8 million. This is was much lower than expected and pushed inventory levels to 15.3% below the same period in 2007. Refinery utilization rose to 89.2% from 88.6% and the additional refining took more oil out of storage. Gasoline levels rose +2.1 million barrels and distillates by +1.3 million barrels. Crude imports were unchanged at 10.2 mbpd. Gasoline imports rose to 1.4 mbpd.
The inventory report was actually neutral for prices but there were some games being played in the futures market. With money coming out of equities in a hurry it appears some of that money is heading straight into oil. The expectations for a rate hike by the ECB on Thursday are depressing the dollar and that pushes oil prices higher. If by chance the ECB did not hike rates on Thursday it would be bearish for oil prices.
You may remember Morgan Stanley predicted $150 oil by July 4th. With oil holding just under $145 tonight I would say the potential for them to buy a few more contracts to make $150 happen is very strong. The market is clearly targeting $150 after numerous comments from oil officials this week suggest the speculator hysteria has faded and fundamentals are again being used as the reason for higher prices.
With the spotlight off speculators for now that allows them to move back into the market without fear of some new law being suddenly enacted. Since the CFTC has said that speculators have been net short for over a year the odds are good they will continue to be net short at $145.
With Friday a holiday in the U.S. the trading floor for energy futures will close at 1:PM on Thursday. However, according to the Nymex website the electronic trading of energy futures will not be affected and trading will continue on Friday. With the rest of the world open for business this should be an exciting July 4th. Volume will be much lower so it will not take much in the way of big trades to push prices around.