Speculators Pushing Crude Oil – Watch For The Sell Off

Crude oil added 29 cents to trade at 101.57 on Friday morning while Brent oil added 22 points to reach 107.89. Crude oil extended gains in the Asia electronic session today buoyed by the strong economic data releases from US yesterday. A continued drop in crude oil inventories at a key U.S storage hub also supported the prices.

The prices shot up after the Commerce Department reported earlier that U.S gross domestic product was revised up to 2.6% in the final three months of 2013, up from a preliminary estimate of 2.4%. Market expectations had been for an upward revision to 2.7%. Still, the report showed that personal spending was revised up to 3.3% from 2.6% initially, the fastest rate of growth in three years

Separately, the Labor Department said the number of individuals filing for initial jobless benefits in the U.S last week declined by 10,000 to a 311,000 from the

previous week’s revised total of 321,000. Data Wednesday from the Energy Information Administration showed that crude-oil stockpiles rose 6.6 million barrels for the week ended March 21, well above the increase expected by analysts. But stockpiles at Cushing, Okla., the delivery point for futures, dropped to continue a recent downward trend, and weekly gasoline supplies dropped much more than expected.

All this positive data does not justify WTI prices trading over $100. Global geopolitical tension in the Ukraine, Libya and Nigeria has had little to do with the price increases. While lackluster manufacturing data from China should be weighing heavily on the commodity, combined with lackluster manufacturing data from the eurozone along with disappointing data from Germany should have crude oil trading near or below its expectations and not rising. Libyan protesters have blocked pipeline carrying oil condensates from the southwestern al-Wafa oilfield to the Mellitah export port. Traders can  expect Crude Oil prices to move higher for the day as tensions in Libya and technical buying can spurt some upside in crude oil prices.

Natural gas gained 36 points this morning climbing steadily after the weekly EIA inventory showed a sharp decline in stocks. NG is trading at 4.550 on Friday morning. The market saw two bumps Thursday, the first in the late morning after the U.S. Energy Information Administration reported a bigger drop in gas inventories than analysts had predicted. Supplies fell by 57 billion cubic feet in the week ended March 21, compared with an average forecasted draw of 54 billion cubic feet, as cold weather continued to drive demand for the natural gas that heats about half of U.S. households.

The 896 bcf in stockpile is the lowest level in 11 years. The strong withdrawals are leading to debate about whether drillers can produce the extra 3 trillion cubic feet of natural gas in time to restock before next winter. Cold weather this week in the Northeast likely will result in another decline in next week’s data, analysts say.