There’s Plenty Of Oil (For Now)

Crude prices rose nearly 10% over the past week despite significant inventory building. Given the buildup in oil supplies, the price hike's gotten pundits' and traders' tongues wagging, wondering if current market fundamentals justify the rally. U.S. oil stocks are, after all, near capacity and fast approaching highs set in boom-time 1993.

This week's U.S. Federal Reserve announcement of quantitative easing fueled oil's rally further, propelling nearby NYMEX oil futures through the $50 mark.

Also driving last night's selling was the market's digestion of data from the American Petroleum Institute showing a 4.6-million-barrel crude oil build last week. Oil analysts surveyed by Platts had earlier forecast a much more modest 1.4-million-barrel add.

U.S. Oil Inventories (ex-SPR)

By the numbers, oil's demand picture hasn't brightened much yet. Currently, gasoline demand is running 0.7% higher than year-ago levels, but the country's thirst for distillate fuels – including heating oil and bellwether diesel – has slackened 9% according to the latest EIA figures.

Momentum, though, remains technically strong. There's resistance at $56.17 and support at the $50.60 level for May futures.