Crude oil prices gained sharply this week, hitting a one-month high after U.S. Energy Information Administration statistics showed a quick drawdown in supplies.
In its weekly Petroleum Status Report, the EIA stated that U.S. crude oil inventories slid by 7.23 million barrels, a 1.8 percent drop in one week.
While the drawdown was partially prompted by increased refinery demand, inventories are also falling because of lower U.S. imports of foreign crude, which fell to a 17-year low this week. As domestic crude oil production has been rising, demand for foreign crude has been waning.
Meanwhile, there are increasing calls for the U.S. to begin exporting crude oil, which it hasn’t done since the 1970s, before the Arab oil embargo.
Recent comments by U.S. Energy Secretary Ernest Moniz and other Obama Administration officials have indicated the government may lift the export ban, which would reverse nearly 40 years of U.S. energy policy.
As the market digested these factors during the last two weeks, crude oil prices gained more than $4 per barrel, pushing near $104.50 on Friday.
As the price of crude oil rose, so, too, did gasoline, which jumped more than a nickel per gallon during the week.
Higher gasoline prices are hitting at a bad time for most Americans, as the upcoming Memorial Day holiday is typically regarded as the beginning of the summer driving season.
Soybeans sprout higher
This week, soybean prices reached the highest level since last summer, shooting skyward as news broke of stronger Chinese demand.
China is the world’s biggest buyer of soybeans, and the Chinese buy most of their beans from the United States, making them the country most watched by soybean traders.
The primary driver behind Chinese demand has been rising meat consumption. As the Chinese population gains wealth, they have been eating more hogs, chickens, and other animals that are primarily fed a diet of corn and soybean meal.
China is able to grow most of the corn it needs, but imports more than 80 percent of its soybean needs.
As of midday Friday, soybeans for delivery in July were trading at $15.13 per bushel, near the highest price since last July.
Walt Breitinger is a commodity futures broker in Valparaiso. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.