Weekly Crude Oil Inventory Plummets

The Energy Department says oil inventories fell by 4.4 million barrels.
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Let's see how the markets make sense out of this?

The Energy Department said crude oil inventory plummeted by 4.4 million barrels in the week ending June 5, giving ammunition to the idea that fundamentals may be aligning with recent crude price increases. Analysts surveyed by Platts forecasted an increase of 800,000 barrels during the week-over period.

Meanwhile, over the past few weeks, the price of oil has surged -- even as other indicators during that time have shown sluggish demand for crude. The uptick in crude oil prices have been largely attributed to speculative investing and a weakening dollar, creating fears of a price bubble. Last week, the EIA said barrels swelled by 2.9 million barrels to 366 million barrels.

But today's news of a crude drop, along with a similar drop in gasoline inventory, puts questions of demand front and center once again. Yesterday, the American Petroleum Institute, an oil industry group, said crude supplies dropped last week by 6 million barrels.

The Energy Information Administration said that stocks fell last week to 361.6 million barrels. Heading into the summer driving season, that's still 20% ahead of last year's levels at this time.

Yesterday, oil settled past the $70 mark for the first time this year. Today's news extended gains on light, sweet crude for July delivery on the NYMEX, which was up $1.69 to $71.70 after the report was released.

The EIA also said that gasoline inventories dropped by 1.6 million barrels, while analysts had expected a 1.1 million barrel rise.

So, those are the facts. Now, let's all sit back and see how many people's heads explode on this news.