Crude Oil Hits Another Record

Wednesday, March 05, 2008 3:49:09 PM - Oil soared on Wednesday and extended its record highs after the Department of Energy reported a surprising decline in weekly inventories. Light sweet crude closed at $104.52, up $4.67 on the session. Oil reached as high as $104.95 in mid-day trading, a dollar better than the previous record reached earlier in the week. Traders also considered reports that the Organization of Petroleum Exporting Countries has agreed to leave production levels alone.
The report from the Energy Information Administration showed that crude oil inventories in the week ended February 29 fell by 3.1 million barrels following seven consecutive weekly increases. The decrease came as surprise to analysts, who had been expecting inventories to increase by about 2.3 million barrels. The EIA also said that distillate fuel inventories decreased by 2.4 million barrels and are in the lower half of the average range. Analysts had expected inventories of distillate fuels, which include heating oil, to fall by about 1.9 million barrels. At the same time, the report showed that gasoline inventories increased by 1.7 million barrels and are above the upper limit of the average. The increase exceeded analyst estimates of an increase of about 900,000 barrels.
Oil cartel OPEC reportedly agreed Wednesday to leave output targets unchanged at its 148th meeting in Vienna, Austria. The 13 ministers said that the record high oil prices had been drive by factors beyond their control. Currently, the production limit for 12 of the 13 members is 29.67 million barrels a day. The decision to keep output targets unchanged was widely expected by the market. The next meeting is planned for Sept. 9, also in Vienna. Prices plunged on Tuesday and dropped below the $100 a barrel mark. Light sweet crude for April delivery moved to $99.85, down $2.60 on the session. Crude fell as low as $99.30, a little more than $4 less than its daily high from electronic trading. Stochastics and the RSI showed over-bought status for April oil. With the rebound, prices re-crossed the 10-day moving average. If prices turn lower, a support level sits at Tuesday's low crossing of $98.87.
On the economic front on Wednesday morning, Automatic Data Processing, Inc. (ADP) released its report on private sector employment in the month of February, showing that employment unexpectedly decreased compared to the previous month. The report showed that non-farm private employment decreased by 23,000 jobs in February following a downwardly revised increase of 119,000 jobs in January. The decrease came as a surprise to economists, who had been expecting an increase of about 15,000 jobs. ADP said that the decrease in jobs in February reflected a deceleration of employment growth across businesses of all sizes.
Meanwhile, the pace of productivity growth in the fourth quarter was unexpectedly revised upwards, according to a report released by the Department of Labor on Wednesday, although the report also showed an upwardly revised increase in unit labor costs. The report showed that the fourth quarter productivity increased by 1.9 percent compared to the 1.8 percent growth that was reported last month. Economists had been expecting productivity growth for the quarter to be unrevised at 1.8 percent. The unexpected upward revision was partly due a revision in hours worked, which decreased 1.6 percent compared to the previously reported 1.5 percent decrease. Output growth was revised down to 0.3 percent from 0.4 percent.