West Texas Intermediate light sweet crude oil for December delivery was spiking 36 cents to $88.89 a barrel following a significant decline in crude oil stockpiles as reported by the Department of Energy of Wednesday. Traders who had been selling off just before the report were promptly replaced by a new influx of money, as the Department of Energy reported a draw of oil just over 4.7 million barrels last week, a gasoline drawdown of 3.33 million barrels and a distillate drawdown of 4.25 million barrels.
"A large drop in imports has brought a huge draw to crude stocks," says Matt Smith, commodity analyst at Summit Energy, a subsidiary of Schneider Electric.
Earlier, a Goldman Sachs analyst told Bloomberg that the steep discount at which WTI has been trading against Brent could narrow by up to 77%, by the end of 2012, as producers rapidly boost shipments by rail from the U.S. Midwest to refiners on the Gulf Coast during the first half of the year. The analyst said that this should "be enough to begin alleviating congestion," the report said.With WTI oil prices pushing up towards $90 a barrel, "some of the shorts are getting scared," says MF Global senior markets strategist Richard Ilczyszyn, who added that the shorts will "run for the hills" if the oil price reaches beyond $91. "If the S&P goes above 1230 and 1250, hedge funds say that money on sidelines will hit the market, and oil might be a spot where they want to participate," he continued. There's been an almost 96% correlation between crude oil futures and the stock market over the last several months. These days, on a day-to-day basis, oil traders are often using the S&P 500 as a barometer for where oil prices might be headed. For instance, an S&P 500 bottom of 1070 corresponds with WTI crude at around $75 and Brent at around $99. "We're riding the wave now," says BGC financial director Roger Volz. The technical analyst says a realization of the $90.60 to $90.90 levels in WTI would lead to "breakout levels" going forward, with the an achievement of the $89.30 level being an "upside accelerator" for prices. "I see a good case for a pop
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