Market Insider

Crude Closes Above $90 for First Time in Six Weeks

West Texas Intermediate oil futures closed above $90 for the first time in six weeks, driven higher by a confluence of factors, including tighter supplies.

WTI gained $2.02 per barrel, or 2.29 percent to $90.21.

Four reasons:

-Stocks rallying, dollar weaker.

-Expected decline in weekly crude supplies.

EIA report is expected to show a three million barrel drop in weekly crude inventories Wednesday (due to production/transportation disruptions in Gulf of Mexico due to Tropical Storm Lee). That's on top of the four million barrel drop last week due to Hurricane Irene.

(However, overall U.S. crude supplies are about 4.6 percent higher than a year ago, while total petroleum demand is basically flat.)

-Brent-WTI unwind. A bigger factor may be a momentum play in the Brent-WTI spread. That spread has unwound sharply as WTI oil prices try to play catch-up with Brent crude . The spread has fallen $7 (almost 17 percent) in a week and declined 7 percent Tuesday. October Brent crude futures expire on Thursday.

-Breaking $90 resistance. Technically, $90 has proven to be a formidable resistance level. WTI has been unable to close above that level on several occasions in the past month. The most recent intraday high was $90.23 on Sept. 8, and oil last closed above the $90-mark on Aug. 3 (at $92.33)

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