Crude oil futures tacked on another record high on Wednesday, closing at $123.57. The Energy Department released the weekly inventory numbers on Wednesday morning, which showed a sharp rise in crude oil inventories. Supplies rose 5.65 million barrels above last weeks numbers. This is the second week in a row where supplies have risen more than expected.

So, why does crude oil continue to move higher in light of increasing supplies? The Labor Department released the productivity numbers, which were stronger than expected. Some believe this points to an improving or stronger economy. That is a stretch in my opinion. Marginal increases in productivity will help quarterly profits and maybe spur a slight economic expansion, but it is not a barometer of an improving economy. In reality, businesses have been finding more ways to squeeze out productivity, since the economy has been stagnant for quite some time.

The extended move in crude oil has entered the euphoria phase. With Goldman Sachs talking about $200 a barrel oil, that was enough to ignite a new wave of buying. It also scared away a lot of would-be sellers. Sentiment has to change for this market to change direction. There will have to be some catalyst to do that. The long-term picture looks good, but its hard to justify prices this high when supplies are still readily available.

The trend is still strongly higher and it is not something I want to fight. Expect some solid resistance between $123 and $125. A break through there means a quick test of $130 and we will be seeing a runaway market. For those who want to short this market, patience is probably the best course for you. Wait until sentiment starts to shift and crude oil becomes out of favor. A break of $110 could open the floodgates.