HardAssetsInvestor

Written by Sumit Roy  |

November 30, 2011

Crude Oil Report: Brent Eyes $115 Resistance; US Becomes Net Fuel Exporter

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Crude oil put in a strong showing this week on the back of strong economic data. We also discuss how the U.S. is set to become a net exporter of petroleum products for the first time in 62 years.

The Department of Energy reported this morning that in the week ending November 25, 2011, U.S. crude oil inventories increased by 3.9 million barrels, gasoline inventories increased by 0.2 million barrels, distillate inventories increased by 5.5 million barrels and total petroleum inventories increased by 7.7 million barrels.

Crude oil prices were slightly higher after the latest figures, with Brent near $111/bbl and WTI just below $101.

Overall, it has been a positive week for crude oil, as strong economic data in the U.S. and elsewhere offset worries related to the ongoing sovereign debt crisis in the eurozone.

Specifically, reports of large crowds of shoppers around the country over the Thanksgiving weekend raised hopes that the retail holiday season in the U.S. is off to a strong start.

According to the National Retail Federation, 226 million Americans shopped over the long weekend, up 6.6 percent from a year ago. They spent $398.62 on average, up 9.1 percent year-over-year. ShopperTrak estimated that sales on Black Friday specifically were $11.4 billion, up 7 percent from a year ago.

Then today, ADP added to the bullish bias after it reported its estimate for job gains for the month of November. The payroll processor said that employers added 206K private positions in the month, well above the 130K that analysts were anticipating. (This Friday’s official numbers from the government are expected to show a 150K increase in private payrolls and a 125K increase in total payrolls.)

Meanwhile in China, the central bank cut its bank reserve requirement ratio by 50 basis points to 21 percent. That's the first decrease since December 2008 and suggests that the People’s Bank of China is now biased toward loosening monetary policy after a year of tightening.

These three positive news items support a fairly bullish global economic outlook. Of course, Europe is the exception, as the sovereign debt crisis rages on in the region.

On that front, the Federal Reserve and five other central banks took coordinated action to reduce the cost of dollar funding in order to ease the strains on the financial system from the eurozone debt crisis. While the action doesn’t solve the underlying budget problems in Italy, for example, it gives confidence to some that events in Europe will develop in an orderly fashion.

In turn, the S&P 500 was able to recover a large chunk of recent losses to last trade at 1240. Brent looks to have a clear path to test the significant resistance level at $115.