The crude oil price broke out to the upside as European Union manufacturing data stunned analysts and give us a surge in oil. The February PMI gauge of Eurozone manufacturing activity came in at 56.0, compared to 54.3 that was the expected read. The rally happed despite a roaring dollar that was pumped on Fed talk that is trying to tell the market that a rate hike may be on the table at the next FOMC meeting. We will get U.S. manufacturing data today as well as more Fed speak but for now, the charts on oil are speaking for themselves.
Crude oil dynamics are changing as rig counts rise, oil discoveries fall and OPEC compliance to production cuts are at an all-time high. Despite short-term worries about a U.S. glut, global oil inventories are on a path to a major tightening scenario and shale oil production alone will not change that.
Oil products are weak as demand fears are weighing down the market, awaiting a time when supply is at historically high levels. Gas demand is at a six-year low as bad weather in California has given a hit to demand and warm temperatures elsewhere in the country is reducing heating oil demand. This comes as refining margins for big oil companies are reducing the positive impact from OPEC inspired oil price increases.