Oil was already against the ropes and off current highs because of the CFTC seeking limits on speculators and on non-end-user trading activities in the energy commodity markets.  But this morning’s weekly oil inventory data from the Department of Energy is showing that either the weak economy and higher unemployment or the higher energy prices has created nothing short of a near-term demand cap.  This DOE data has both the the United States Oil (NYSE: USO) ETF and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL) in retreat.

The DOE reported a gain of 5.15 million barrels of crude oil to 347.8 million barrels in the last week.  Gasoline stocks did fall, but ‘only’ by 2.3 million barrels to just over 213 million barrels.  Distillate levels gained 2.1 million barrels to 162.6 million barrels.

As far as estimates, we had some discrepancies over these figures this morning.  But we were looking for both crude and gasoline stocks to post a drop of close to 1 million barrels a piece.  While this does show more gasoline was consumed, that crude increase essentially negates the gasoline inventory drop by threefold.

As far as capacity, refineries are running a bit soft at 84.5%.  That is down from 85.8% last week and under the 85% to 85.5% we had been told to watch for.

The United States Oil (NYSE: USO) ETF is down 4.5% at $34.14 and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL) is down 4.7% to $22.45.

Thereis an important move today in the charts.   This drop today in the USO has created a technical event confirmation.  The chart at StockCharts.com shows that this failed to rise and hold as the 50-day and 200-day moving averages converged.

The chart looks similar in the “OIL” version of the oil trading ETF, although that has not converged as you will see in the StockCharts.com chart for ‘OIL’ ETF .

NYMEX WTI Crude is also down sharply by more than $3.00, which has black gold challenging the $64.00 per barrel mark.
Jon C. Ogg
July 29, 2009

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