Got Gas? There's Less Now


"Oil's contango was trimmed by a third over the past week. . . "

April crude oil was higher overnight Tuesday due to continuing short covering. Prices moved steadily higher throughout the session, then eased off just ahead of the NYMEX floor opening and the release of the weekly Energy Department inventory report. Traders must have seen something the Oil Patch analysts couldn't.

The U.S. Energy Information Administration report revealed a 700,000 build in crude stocks despite a consensus forecast among analysts of a 200,000-barrel drawdown.

Calls for a steadying in refinery utilization among the sell-siders were also off base. Instead, EIA says capacity usage declined nearly a percentage point to 81.4%.

Gasoline stocks, says the EIA, declined by a larger-than-expected 3.4-million barrel margin. Traders' expectations of a substantial draw on supplies were reflected in Tuesday's NYMEX action. Unleaded gasoline futures rose 3% by the close of Tuesday's floor session.

Overall refining margins have now declined to levels not seen in a month and seem to be testing the steep uptrend line established late last year.

Oil's contango was trimmed by a third over the past week, paring the quarterly carry to 10.5%. That's still plenty of incentive to hoard oil for later delivery.

Crude's technicals hint of a short-term low, but closes above $40.40 in the nearby April contract would confirm the market's strength.

Meantime, the $34 level remains the bull's-eye for shorts.

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