Oil fundamentals calling for a correction

Front-month WTI crude oil broke above the $80/bbl resistance level, climbing to $82/bbl in New York last week, despite gains in both API and DOE inventories and increased US crude and
distillate fuel production levels. After the US API reported a 3,847K barrel increase in crude oil inventories on Tuesday, the next day DOE inventory data also showed a 1,312K build in crude stockpiles. Distillate inventories declined 784K bbls. Although gasoline stockpiles contracted, most of the investor associate the 2,200K run on DOE gasoline stockpiles with decreased refinery usage (utilization rates are down 1 percentage point, to 81%).

The recent build on crude inventories is a function of decline in refinery runs and seasonal demand weakness for gasoline. The build in inventories could imply that a growing speculative premium is driving crude oil prices. According to the latest CFTC data on NYMEX crude oil, speculative net long positions have increased by 21,191 contracts, with the number of bullish investors expanding 3.2% w/w.

Base on the report I read they believe an oil price around $71/bbl-$73/bbl would be more consistent with current underlying fundamentals and they think that crude oil above $80/bbl is unsustainable, given weak demand.