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AnalysisCrude oil extended its gains on Friday buoyed by optimism after the release of the EIA report yesterday showing that U.S. gasoline and stockpiles slipped more than expectations and therefore suggesting stronger demand on energy products from the world's top crude consumer.

 

The EIA report was released the previous day showing that U.S. commercial crude oil inventories increased by 0.4 million barrels from the previous week. At 337.8 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year. Total motor gasoline inventories decreased by 5.2 million barrels last week, and are just above the upper limit of the average range. Finished gasoline inventories decreased but blending components remained unchanged last week. Distillate fuel inventories decreased by 1.1 million barrels, and are above the upper boundary of the average range for this time of year.

 

Following the API report released on Wednesday, the EIA report came to give support that demand on oil is improving as signs of recovery emerge. U.S. data released yesterday provided indication that there is improvement in the labor market as jobless claims progressed. Markets are awaiting U.S. industrial production and capacity utilization figures which are also expected to show amelioration.

 

Moreover, U.S. stocks gained last night with Dow Jones holding above 10,000 points at the highest level this year for the second day boosted by oil share such as Exxon Mobile and Chevron Corp. which rose nearly 15% as oil prices closed above $77 a barrel. In Asia, shares failed to trace gains in the U.S. as earnings of LG missed analyst's forecasts. Japanese Nikkei Index; however closed on 0.18% gain.  

 

Eyes this week has been on earnings from large companies as it gives clearer picture to markets. Goldman Sachs and Citigroup disappointed investors causing a drop in stocks before rebounding again erasing its losses. General Electric and Bank of America are due later on today.

 

Moving to currency market, the greenback surged today from 14-month low versus a basket of major currencies. The dollar index, a gauge of the dollar's strength vis-à-vis a basket of major currencies bounced to 75.56 from the opening at 75.41. The dollar's incline today may cap oil's gains which reached around 8.75% this week.

 

Oil prices are expected to face downside pressure at the end of the week where some investors are closing positions while others are taking profits after prices has reached one-year high above $78 a barrel.

 

Now, oil is traded at $77.80 recording a high of $78.15 and a low of $77.57, whereas the contract on Thursday augmented $2.40 closing at $77.58, while recording a high of $77.97 per barrel and a low of $74.79 per barrel.