Oil breakout follow through
Crude oil prices are on fire after several key moves: bullish data from the American Petroleum Institute (API), talk of more stimulus in China and hopes for a Greece bailout deal.
The API reported a massive 6.7 million barrel oil draw raising questions about pace of U.S. shale oil output as U.S. oil rigs continue to drop and oil demand seems to be rising. While the API did show a slight 38k barrel increase in Cushing, Okla., the overall draw in oil products has sent oil to complete its technical bottom.
As we wrote yesterday, "From a technical perspective last Monday's break above $61 per barrel should still target a move toward $66 a barrel later this month. The sharp sell-off on Greek default fears and U.S. supply data that disappointed to the upside should be offset by global economic stimulus. The failure to close below the $58 a barrel channel on closing the resistance did signal todays new high on this recent move."
The API also reported a whopping 3.9 million barrel drawdown in gasoline as Americans get back in their SUV's in a big way. There was some worry after last week's data that U.S. oil demand was faltering. Yet the big drop in gasoline and overall products should alleviate those concerns especially if the Energy Information Administration (EIA) also shows a big drop in oil and gasoline supply.
Oil also got support from the EIA Short-term Energy Outlook. Even though they are projecting that total U.S. crude oil production will hit a 43-year high this year, averaging an estimated 9.6 million barrel per day in May, they say that they are seeing it peak and expect that output will generally decline from June 2015 through early 2016 before growth resumes.
Projected U.S. crude oil production averages 9.4 million b/d in 2015 and 9.3 million barrels per day in 2016. While the forecast is 0.2 million barrels per day and 0.1 million barrels per day higher for 2015 and 2016, respectively, than in last month's it is primarily because of revisions to actual production data from the first quarter of 2015 .