crude oil outlook

Crude oil Outlook
02 June 2008 10:13:52



Oil prices finished higher on Friday as weaker dollar spurred fund buying and short covering due to the weekend. Unexpected drop in US oil inventories released on last Thursday also supported the oil prices.



Crude oil July in NYMEX settled at $127.35 ($126.62), after trading in the range $124.67 - $128.30.



The weekly inventory report by US Energy Department’s Energy Information Administration showed an 8.8 million barrel drop in the nation’s crude supplies to 311.6 million, in the week ended May 23.



But according to the EIA, the drop in crude inventories was due to temporary delays in unloading oil tankers along the GulfCoast, and not the result of increased demand.



Potential supply threats due to geo-political tensions, expected demand from China and OPEC’s unwillingness to increase output despite high prices continue to underpin oil prices.



Another attack on Nigerian oil facilities refocused concerns on immediate supplies. Production was partially disturbed after militants attacked a major oil pipeline owned by Royal Dutch Shell in the Niger Delta on Monday.



Meanwhile, Iran has cut its crude oil exports by 200,000 barrels a day since February 20 due to a seasonal fall in demand for crude oil during the refinery maintenance period. Iran is the world's fourth biggest oil exporter, currently producing around 4 million barrels a day, of which roughly 2.5 million barrels a day is exported.



Oil prices have soared by over 30 percent since the beginning of the year, extending a long-term rally that has seen prices more than double since the beginning of 2007, as market players weigh rising demand against concerns over production.



Expected strong energy demand from China after the Asian nation suffered a devastating earthquake last week and higher gasoline purchases from the United States ahead of the summer driving season have also boosted crude. On the supply side, ministers from the OPEC have indicated any output increase from the cartel remains unlikely, as it continues to blame record prices on speculation, geopolitical factors and the dollar's decline, rather than a lack of crude in the market.



DWTI (July) traded in the range $128.22 - $125.00 and closed at $127.50.



TECHNICAL OUTLOOK (Intra-day)

DGCXCrude (July) - Bullish above 127.30; bearish below 126.90

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