Oil rallied yesterday after the violence in Iraq which damaged a major crude pipeline causing a shortage in output. Supply concerns fueled crude markets as prices gained bullish momentum, and investors ignored the stabilizing dollar. A stronger dollar usually means that dollar backed commodities are less appealing to traders, as it is oil is known a hedge against the falling dollar and inflation. The contract gained $1.68 closing $107.58 reaching a low $105.03 per barrel and a high of $108.22 per barrel.
Today, prices continue to soar as the exports from Iraqi terminals have been cut by about 1.2 million barrels a day. Fear of disrupted imports for the US is inclining prices of oil, as US is known to be the world's biggest crude consumer. Also in regards to that the EIA report Wednesday showed that domestic oil supplies fell more than it was expected, as crude stockpiles were unchanged opposing expected rise, adding by that more to bullish oil prices. Today crude contracts for May delivery opened at $107.19 setting a low of $106.29 per barrel and a high of $107.46 per barrel.
Wednesday the EIA report was released showing U.S. commercial crude oil inventories remained unchanged from the previous week. At 311.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories decreased by 3.3 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and gasoline blending components inventories decreased last week. Distillate fuel inventories decreased by 2.2 million barrels, and are in the lower half of the average range for this time of year.
As long as there is tensions in the Middle East crude prices will continue to spike in fear of weakened supply, as they hold 30% of the world's reserves. Keeping in mind that the future outlook for oil prices is towards the upside, investors stay glad as they watch the price of oil rise while consumers keep their fingers crossed in fear of inflationÃ¢â‚¬Â¦