Crude oil futures lingered below $75 a barrel in overnight trading after industry data showed a surprising drawdown in U.S. crude inventories. NYMEX crude for March delivery was down as much as 33 cents at $74.38/barrel an hour ahead of the release of the government's weekly inventory report. The contract settled down 55 cents in Tuesday's NYMEX floor session.
For the week, crude oil fell 3.8%, while gasoline prices barely moved the needle with a 0.7% uptick.
The API's guess turned out to be closest to the mark when the government reported crude oil stocks had been drawn down by 3.9 million barrels. While inventories declined to 326.7 million barrels, they're still slightly above average for this time of year.
Refineries operations were busier than expected—at 78.5% of capacity—as gasoline production increased to an average 8.6 million/bpd, and daily distillate fuel production rose to 3.5 million barrels.
Overall open interest in the crude market was built up by 2 percent this week, as trading volume fell off dramatically in the last three trading sessions. The action seems to indicate a waning in the aggressiveness of short sellers.
In fact, short-term stochastics turned up yesterday, while the RSI indicator bounced off the oversold level. March crude has to stay above $75 to revive bullish hopes. The market ought to be bolstered by support at its $73.51 200-day moving average. Resistance looms overhead at a $77.03 retracement level of the December-January rally.