Crude Oil Bears Hibernating, Inventory Drops, U.S. Warships Cruise Gulf (USO)

July 18, 2012 10:37 AM EDT
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U.S. crude inventories dropped again last week, according to data from the EIA. Today's report showed a decline of 809k barrels, less than analyst expectations of a drop of approximately 1.2 million barrels. The drawdown in stockpiles comes as the U.S. enters the peak driving season.

United States Oil Fund LP ETF (NYSE: USO) has gained 6.5 percent in the past month as the price of WTI futures recovered from lows below $80 per barrel. Last month's downturn was triggered by fears of slower demand as a result of a weakening global economy. This week prices have tested higher, nearing two month highs just under $90 per barrel as geopolitical concerns in the Middle East were once again thrust into the spotlight.

One Indian national was killed and three others were injured on Monday when the US refueling ship, the USNS Rappahannock, opened fire on a small motor boat which US officials said ignored repeated warnings to halt its approach The United States has been building up its presence in the Gulf as Washington seeks to ramp up pressure on Iran over its nuclear program.

For its part, Teheran continues to make threats to halt oil shipments through the Strait of Hormuz.

As a result of the tensions, traders are reluctant to short oil and crude appears to be trading as a one sided bet. Everyone who wanted to exit long trades has already exited, and with fresh shorts coming few and far between, oil prices have drifted higher over the past five days.

United States Oil Fund LP ETF (NYSE: USO) was higher by 0.50 percent prior to the release of inventory data. WTI traded at $89.70. Brent traded at $104.60.

The following is a list of popular crude oil ETFs: (NYSE: USO) (NYSE: OIL) (NYSE: UCO) (NYSE: SCO) (NYSE: DBO).

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