Oil is creeping higher and higher on the fundamental belief that the Fed will not give the markets an excuse to believe that it is going to take away its stimulus today. Some blame the rising threat in Syria as another reason to be long, but really I think that this is more about the Fed than the ongoing conflict. Yes, the stakes have been raised in Syria, but Obama's "game changer" and risks are ruining that this conflict could escalate, but it is the funds that are being attracted to oil for more reasons.
If the Federal Reserve signals tapering sooner rather than later then it is risk-off and oil fall. The dollar will rally and fear that this will set off a massive drop in demand in emerging markets that have been riding the hot money from the Fed into an economic explosion. If the Federal Reserve signals that the tapering is way off into the future, then traders will drive oil higher and perhaps break oil out over $100. Oil also may take a look at inventory data as well after the American Petroleum Institute reported a 4.29 million drop in U.S. crude supply. Of course it was not as stunning as last week's massive reported increase in supply and really only gets the API back more in line with the Energy Information Administration. The EIA has stocks as of last week at 393.8 million barrels. The API had stocks at 396.3million barrels so if you subtract the 4.29 million barrels it puts supply at 392.01 million barrels, which would mean a drop of only 1.79 million barrels if the EIA agrees on the total number. As far as products go they reported a blah drop of 607,000 barrels of distillate and a boring increase of 19,800 barrels of gasoline.
Another factor to consider is demand from Japan. Dow Jones reports that "Asia's crude oil market is likely to benefit from peak summer demand and improving refining margins. Japan's crude oil stocks as of June 15 fall 6% on week to 15.74 million kiloliters; crude oil and condensate imports in May rise 0.7% on year to 16.7 million kiloliters, or 3.39 million bbl/day. Japan, which has two of 50 nuclear reactors online, has seen reduced power demand this year, curtailing demand for crude and fuel oil; more reactors may restart later this year so fossil fuel demand could fall further. Idemitsu Kosan said it plans to lower 3Q crude refining for the domestic market by 2% on year to 6.3 million kiloliters."