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Two contributors to crude oil spike – Sober Look

This is a syndicated repost published with the permission of Sober Look. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

While nobody wanted to pay any attention to Egypt ten days ago (see post), all of a sudden the situation there is grabbing headlines. As usual, these protests were planned, July 30th was the starting date, and the military has been posturing for some time. And now that we’ve had the coup, the generals own Egypt’s economic mess.

Crude oil popped above $101 in response to Egypt’s unrest and its potential implications for the Middle East as a whole.

But another, more domestically based surprise driving WTI crude higher was an unexpected and quite sharp decline in US crude oil inventories.

Source: EIA

Some are attributing this decline in crude stocks to higher interest rates, which makes storage of crude (cost of carry) more expensive. Perhaps. A better explanation however is the improved transport to the Gulf Coast refineries and a somewhat higher demand for refined products.

Source: EIA

This is not great news for the US consumer. The higher mortgage rates and the end to the mortgage refinancing spree were to some extent offset by a bit lower gasoline prices (although prices are still up on the year).

Source: GasBuddy.com

But given the spike in crude, that benefit has ended for now and summer drivers will pay more at the pump.

SoberLook.com

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