Article by ForexTime

The strong dollar has eroded the price of oil despite robust demand for distillate fuels ahead of the winter season.  International demand is pushing up U.S. exports of petroleum products, primarily from the Gulf Coast.  According to the Department of Energy year-to-date product exports through June 2014, including gasoline, distillate, and jet fuel averaged 3.7 million barrels per day up 543,000 barrel per day over last year.

Gulf Coast refineries remain extremely competitive in the global market because of access to cost-advantaged inputs, significant upgrading capacity, and proximity to significant demand centers. As a result, the region supplies large volumes of distillate and gasoline to the global market.

Despite higher total U.S petroleum product exports, the East Coast remains reliant on imports to meet regional demand for both gasoline and distillate. Through June, imports of total motor gasoline averaged 536,000 barrels a day, 15% less than in the first six months of 2013. Distillate imports in the first six months of 2014 averaged 217,000 barrels a day, an increase of 72,000 barrels a day from the same period last year, and due in large part to higher demand caused by cold weather this past winter.

Higher demand has not led to higher prices and with the dollar gaining strength, crude oil prices are likely to face headwinds. The dollar jumped on Thursday following an announcement by the European central bank that they are cutting rates.  An increasing dollar is disadvantageous to oil prices.  Since oil is priced in dollars, a rise in the value of the dollar is offset by a decline in oil prices.

Crude oil prices moved lower and traded below trend line support.  Momentum is turning negative with the MACD poised to generate a sell signal.  The RSI is printing near 38, which is on the lower end of the neutral range.

Article by ForexTime

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