Crude oil is extending its gains as OPEC said that it is not going to pump more oil into the market as there is no shortage. They believe the only reason the US wants them to increase their output is to lower current crude oil prices. The US is worried that supplies of gasoline and diesel are insufficient due to the summer driving season is soon to come. Asia's increasing demand for diesel is adding more pressure on the current supply. Yesterday the contract gained $0.16 as it closed at $123.69 while recording a high of $124.61 per barrel and a low of $121.58 per barrel.
Ongoing violence in Nigeria, which is Africa's largest crude oil producer, is behind the spike in crude oil prices. As they cut back on their production of crude oil due to militants attacking a pipeline, this is adding to consumer's fears since it may take a couple of weeks before they return to their normal production output. Investors continue to shift their investments to crude oil markets as they see that so far crude oil climbed 13% this month. Today crude oil markets recorded an all time high so far of $124.73 per barrel as it opened at $124.28 while recording a low of $124.08 per barrel.
Looking back at the EIA report that was released Wednesday showed that the U.S. commercial crude oil inventories increased by 5.7 million barrels from the previous week. At 325.6 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 0.8 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories fell last week while gasoline blending components inventories increased during this same time. Distillate fuel inventories decreased by 0.1 million barrels, and are in the lower half of the average range for this time of year.
Crude oil prices will continue their rally as tensions in Iran and Nigeria still take place while this adds to global inflationary pressure. Although investors usually enter crude oil markets as a hedge against inflation and the falling dollar, but not this time as there is a strengthening dollar while their main focus is on supply and demand factors which currently control the market.