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The streak is over. After 10 straight weeks of inventory-building, oil supplies fell by 2.2 million barrels, according to this morning's report from the U.S. Energy Department. Traders fairly well predicted the off-take as prices rose nearly $1 per barrel in overnight trading after dipping Tuesday. Tuesday's softness followed the release of the American Petroleum Institute's estimate of a 1.4-million-barrel build in oil stocks. Wall Street analysts were looking for similar growth—between 1.3 million and 1.5 million barrels—in crude supplies. Gasoline futures fell in aftermarket trading Tuesday after the API forecast motor fuel stocks would rise by 1.6 million barrels. Oil Patch watchers, calling for a draw of 600,000 to 800,000 barrels, were closer to the government's finding of a 1.1-million-barrel decline. The API's estimate for distillate fuels stocks, at 1.7 million barrels, was a bit aggressive. Energy Department figures show inventories rising by 1.1 million barrels. Analysts were looking for an increase of 600,000 to 900,000 barrels. Refinery utilization, forecast to remain unchanged at 84.5 percent, instead picked up to 85.6 percent. Gasoline production increased to a daily average of 9.2 million barrels, while distillate fuel production decreased to 4.0 million barrels per day. Gasoline demand averaged 9.1 million barrels per day, up 2.8 percent from last year. Average daily distillate fuel demand is up 0.4 percent to 3.7 million barrels. On Tuesday, crude futures settled lower for the fifth day in a row, as traders focused on surging inventories ahead of the weekly reports. Trading was more buoyant in the overnight market as prices for the NYMEX May delivery pushed upward to the $85 level ahead of Wednesday's opening bell. Trading Week For the week ending Tuesday, crude prices were down 3.2 percent while gasoline slipped 1.4 percent. Heating oil fell 2.3 percent. The decline in input costs bolstered crack spreads and improved refining margins. Margins for gasoline-heavy 3-2-1 operations rose to 14.4 percent, maintaining a premium—albeit an eroding one—over 2-1-1 refining runs. Average daily volume in NYMEX crude jumped to 1.05 million contracts this week as open interest ballooned to 1.44 million. Nearby NYMEX Crude Oil 
The crude oil market flipped this week as West Texas Intermediate slipped to a discount versus heavier North Sea Brent. Last week, WTI was trading at an average $2.21 per-barrel premium to Brent. Contango also widened. The three-month NYMEX roll averaged $2.37 per barrel this week compared with $1.25 last week. Steepening contango signals a market overburdened with product, incentivizing traders to store excess oil. Still, crude oil remains in uptrend despite the recent string of declines. A bid developed in the May contract below $83 yesterday. As long as buying interest keeps the nearby contract above $83.17 on a closing basis, crude stands a chance of mustering enough strength to work itself toward a test of the $90 level—a price plateau that retraces 50 percent of crude's 2008-09 decline. Failing that, a reactive dip to the $79 level could ensue, but would still leave the longer-term uptrend intact.
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