Oil has been moving to the upside today following a very bullish inventory report from the Energy Department. Oil for February delivery has moved higher by 76 cents to $90.84 and earlier in the session traded all the way up to $91.48.The reason for today's move was a very unexpected decline of 7.6 million barrels of crude supplies last week. Heading into today's report, analysts had been expecting to see a drop of only 1.5 million barrels.
The gasoline portion of the report turned out to be bearish though. Analysts had been looking to see gasoline inventories rise by 700,000 barrels, but the actual results showed an increase of a whopping 3 million barrels during the week.
With today's reported drop in crude supplies, the U.S. is now sitting on oil stockpiles that are nearing a three year low. Last week's drops can be attributed mainly to mother nature -- with a dense fog storm off the Gulf Coast and an ice storm in the U.S. -- both leading to supply disruptions. Estimates show that of the 7.6 million total drop in inventory, 5.8 million barrels can be traced back to supply disruptions from the Gulf Coast.
Don't expect to see prices move much higher on today's report. While it is definitely a huge draw in supplies, most traders realize that this is more or less a situation that is going to quickly reverse itself and is not really a sign of global supply weakness.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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