HardAssetsInvestor

Written by Sumit Roy  |

October 26, 2011

Crude Oil Report: Will Major Reversal Of WTI-Brent Spread Last?

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WTI’s move into backwardation pushes it above $90, outpacing Brent significantly.

The Department of Energy reported this morning that in the week ending Oct. 21, U.S. crude oil inventories increased by 4.7 million barrels, gasoline inventories decreased by 1.4 million barrels, distillate inventories decreased by 4.3 million barrels and total petroleum inventories increased by 0.7 million barrels.

Crude oil prices fell modestly after the latest EIA figures, with Brent last trading near $109, while WTI traded near $91.

Brent continues to face resistance at the downward trend line that extends back to April. We expect that strong fundamentals will eventually spur prices to break above the trend line — and make their way toward the next key levels of resistance at $120 and $127.

The S&P 500 broke its key technical resistance level near 1220 late last week thanks to a combination of better-than-expected economic data and strong corporate earnings. The stock index should continue higher, boosting investor confidence in the process.