Oil is back above the April high. Watch the close

Oil will be an interesting spot to watch as it fights for a sixth straight week of gains. It’s currently trading at $83.69, which is up 80 cents but more importantly is above the April high of $83.53.

A close above that level

The driver at the moment appears to be products. Gasoline and diesel inventories are tight, in part because of Russian sanctions. US gasoline futures rose 2.4% today and at the highs would be at the highest level since last October.

Here is a great chart from HFI Research showing US gasoline storage.

This is going to be a spot to keep a close eye on in the weeks ahead. Demand for gas and diesel may get refineries running more aggressively but the risk is that retail gasoline prices blow out and that hurts demand for crude so it runs both ways.

Ultimately though, these inventories need to rebuild and that should take some oil barrels off the market. With the Saudis extending their voluntary cut through September, there isn’t going to be any extra oil around.

I suspect oil will break out to the upside and run to $90 or $94 to match the highs of last autumn but I’m not sure the market is ready for a breakout yet.