Nymex Crude Oil continues to rise, here’s why

The most recent refinery issues come from Valero Energy Corp.
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their recent announcement that they will be shutting down 15,000 barrels a day
of gasoline production in order to complete repairs on the Texas City, Texas
refinery. This obviously has traders on the edge as we head into the driving
season that begins in late May. This is typically the time of year when refiners
are building supply ahead of the seasonal demand spike. These most recent
concerns have the Nymex crude oil futures market trading more than $5.00
($73.90) higher than the recent lows on Mondays session when Nymex crude oil
traded as low as $68.25.

The geo-political picture continues to be checkered to say the least and the
most recent news out of Nigeria continues to stoke fears of more supply
interruptions out of that region. The MEND rebels (Movement for the Emancipation
of the Niger Delta) are denying involvement in the recent shooting death of a
foreign oil worker in the region. Nevertheless they are threatening more
violence if their demands for domestic only workers are not met. Over 25% of the
production of light sweet crude oil in the region has been interrupted by rebels
associated with MEND. The production from this region is very hard to replace
because the excess capacity from other producers is of a much heavier thereby
lower quality grade. Nymex crude oil prices are greatly affected by losses of
this type of production.

While the front month contract for Nymex crude oil is on the rise, there are a
couple points of resistance ahead (74.99 and 75.35) that will need to be met
with growing concerns on the fundamental front in order for this market to push
through. There is also a bit of trendline resistance forming here and I’m
waiting for the market to violate that trendline (just above 74.90) before
getting long again.