Market Overview

Crude oil futures - Weekly review: May 16-20

Forex Pros – Crude oil prices edged higher for a second consecutive week in volatile trade last week as buyers re-entered the market on short-covering ahead of June’s contract expiration and as concerns over a slowdown in U.S. demand eased.

On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD99.94 a barrel by close of trade on Friday, gaining 1.4% on the week.

Meanwhile, the June contract expired at the end of trading on Friday, settling at USD99.49 a barrel.

Crude prices jumped 1% in volatile trade on Friday as a flurry of short-covering caused prices to rebound midday from early lows. Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.

Prices were also supported after the American Petroleum Institute reported that total U.S. crude oil and petroleum product consumption, a broad measure of demand, jumped 5.2% in April to 19.9 million barrels a day.

Meanwhile, expectations of increased gasoline demand in the U.S. supported prices, as the country enters the summer driving season.

The U.S. peak gasoline demand period starts after the Memorial Day holiday in late May and ends on Labor Day in early September. The holidays fall on May 30 and September 5 this year.

On Thursday, oil prices dipped after data showing a slowdown in manufacturing growth in the U.S. Mid-Atlantic region and an unexpected dip in existing home sales in April added to concerns over the pace of the U.S. economic recovery.

Data from Japan showing the recent earthquake and tsunami had pushed its economy into recession in the first quarter also weighed. Japan is the world’s third largest crude consumer.

Government data released on Wednesday showed that total U.S. crude oil inventories fell by 15,000 barrels last week, confounding expectations of a 1.5 million barrel increase. Total motor gasoline inventories increased by 119,000 million barrels, falling short of expectations for a 1 million barrel gain.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery traded at USD112.36 a barrel by close of trade on Friday. The Brent contract dipped 0.1% on the week and was up USD12.42 on its U.S. counterpart.

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