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• WTI breaches upper end of trading range
• Brent Responds to Fiscal Cliff Negotiations
• Sentiment Gained as US Fiscal Cliff Showed Progress

January crude oil prices trended lower during the initial morning hours, weighed down by strength in the US dollar and perhaps a delayed reaction to yesterday's EIA inventory data. Fresh concerns that US lawmakers might not be able to reach a deal on the fiscal cliff by Christmas have stoked economic slowdown fears. Some of the late day weakness from yesterday (and the Fed's decision to pursue QE4) appears to have carried over into the initial morning hours. OPEC's secretary general made the headlines this morning noting that he did not see the increase in US production as a threat and that OPEC production would likely maintain current quota with Brent prices in the $110 area. Yesterday's EIA report showed an unexpected build in crude stocks last week of 843,000 barrels. The build pushed current stock levels to 372.609 million barrels, which is the highest for this week since 1987. EIA crude stocks are 38.458 million barrels above year ago levels and stand 46.454 million barrels above the five year average. Crude oil imports for the week stood at 8.499 million barrels per day compared to 8.230 million barrels the previous week. The refinery operating rate was down 0.2% to 90.4%, which compares to 85.1% last year and the five year average of 85%.

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