Crude Oil Closes Modestly Higher, Monday, June 02, 2008 3:34:53 PM

Oil closed another choppy session mildly higher for the day. Light sweet crude for July delivery ended the session at $127.76 per barrel, up 41 cents on the session. Crude touched as low as $125.22 in electronic movement but later rallied to as high as $129.35.

Crude has been very uncertain over the last few sessions as it moved away from a record high of $135.09 in mid-May. Crude added 73 cents in a volatile Friday session. July crude oil added nearly $15 in the month of May.

The hurricane season officially got underway on Sunday. Tropical Storm Arthur caused three crude oil ports in Mexico to close for shipping on Sunday. However, the storm dissipated to a depression on Monday without causing damage to oil regions in the Gulf of Mexico.

Traders will closely watch the weekly inventory report on Wednesday. According to last week`s data, inventories were down 8.88 million barrels, much more than expected. But the EIA said the drop was due to temporary delays in crude oil tanker off-loadings on the Gulf Coast. On the data, crude oil for July delivery prices surged as high as $133.12 after the 10:30 a.m. ET report, but gave back its gains within about 30 minutes and closed sharply lower.

Stochastics and the RSI remained neutral for July crude oil. Psychological resistance may be found at $135 as prices slipped lower after crossing that mark briefly last week. Friday`s low crossing of $124.67 could serve as support.

Activity in the U.S. manufacturing sector shrank for the fourth consecutive month in May, according to a report released by the Institute for Supply Management on Monday, although the pace of contraction slowed compared to the previous month. The ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.

Also Monday morning, a Department of Commerce report showed that construction spending fell 0.4 percent in April following a revised 0.6 percent decrease in March. Economists had expected spending to fall 0.6 percent compared to the 1.1 percent decrease originally reported for the previous month.