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When we looked at oil prices this morning, we noted that traders had pushed up prices on two factors; anticipation of a rate cut from the Fed, and anticipation of a possible bullish inventory report today from the U.S. Energy Department. Well, The Fed did cut rates by 50 basis, but the inventory report this week was more on the bearish side.
Traders have opted to keep oil prices in the green today, focusing on the Fed’s decision instead of the the government report that showed inventories rose more than expected last week. Going into today’s report, the market was expecting to see a rise of 2.3 million barrels, but what we actually saw was a bit more than 50% higher than estimates at 3.6 million barrels.
This is the sort of news that would usually lead to oil prices heading into negative territory, but not today. The 50 basis point cut from the Fed can be given credit for today’s move in oil prices. Prices are currently trading up 66 cents to $92.30. At these prices, we’re just about even with where we were earlier this morning before the report hit the market.
We’d speculated that a interest rate cut along with a bullish inventory report could result in prices moving up towards $100 once again, but for now it looks as though prices will be stay pretty steady in the low to mid $90s for a while. Of course, that will depend on what we hear from OPEC later this week.
Earlier this month President George Bush visited several OPEC nations, making his case for the cartel to boost production at this week’s meeting, but that is looking to be a long shot at this time. Even before today’s report hit the market, OPEC ministers had been saying that a production hike was not likely, and you can be sure that they were paying attention to today’s report.
Look for OPEC to leave output unchanged later this week, and keep oil prices steady above the $90 level.
Let’s take a look at a current chart of oil to see just how the precious crude has been trading as of late:
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor’s Observer.
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