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AnalysisOil dropped slightly on Thursday on reduced imports from Japan which suggests weaker demand on energy from the second-largest crude consumer. Japan reported that its imports retreated 13% from a year ago.

 

Crude prices gained last night as the dollar dipped to the lowest level in 14 months which increased the appeal of commodities, especially oil which reached a high above $81 a barrel.

 

Moreover, the EIA report was released yesterday showing that U.S. commercial crude oil inventories increased by 1.3 million barrels from the previous week. At 339.1 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 2.3 million barrels last week, and are near the upper limit of the average range. Finished gasoline inventories decreased while blending components increased last week. Distillate fuel inventories decreased by 0.8 million barrels, and are above the upper boundary of the average range for this time of year.

 

The report showed improvement in demand from the world's no.1 crude consumer, adding to evidence that the economy is improving and the worst is over.

 

Oil continued its rally towards one year high, despite the drop in U.S. stocks on Tuesday. The contract surged $2.25 closing at $81.37, while recording a high of $82.00 per barrel and a low of $77.64 per barrel.  Equities fell at the end of the trading session after warning from financial analyst which outpaced the better-than-expected earnings by Morgan Stanley and Yahoo. In Asia, shares fell also pushing down the MSCI Asia Pacific Index to the lowest level in 3 weeks, while Nikkei Index lost 0.6% at its closing ahead of announcing earnings of large Japanese companies.

 

In the currency market, the U.S. dollar strengthened on Thursday climbing to 75.32, according to the dollar index, from the opening at 75.08. The green currency is gaining support at the 14-month low level. The dollar's decline yesterday encouraged demand on commodities as seen by future commodities indexes; S&P GSCI advanced 12.82 points to 525.06 and RJ/CRB Commodity edged up 5.96 points to 284.09.

 

Now, oil is traded at $80.62 recording a high of $81.45 and a low of $80.55. Oil is expected to face a resistance at $82.00, while gaining support at $75.00.