Oil drops despite inventory draw; Key support being tested

Summary:

  • EIA inventories: -3.1M 

  • Gasoline and distillates show sizable builds

  • Oil remains under pressure after Tuesday’s sell-off

 

The weekly crude oil inventory release from the EIA has shown a slightly larger than expected drawdown, although the report overall is pretty mixed. There was a lot of noise in the immediate aftermath, but in general it appears that the news has not provided a bullish enough catalyst to see more of yesterday’s declines recoup and price is drifting towards the recent low of 63.80. Selected figures from the release are shown below:

 
  • EIA Inventories: -3.1M vs -2.7M exp. -9.5M prior

  • API (released last night): -1.4M vs -2.7M exp 

  • Gasoline: +3.6M vs -2.4M exp. 

  • Distillates: +5.7M vs -1.0M exp

  • Production: -0.3M bpd

  • Refinery utilisation: -0.3% vs -0.3% exp

 

The initial reaction saw the market trade in a typically volatile fashion but as the dust settles on balance, it seems to be mildly negative with price trading at new low levels for the day. Source: xStation 

 

The longer term picture for crude oil is a little unclear at the moment with Tuesday’s session seeing the largest drop in several weeks. The root cause of the selling appears to have been caused by an apparent de-escalation in the US-Iran tensions which have threatened for quite some time now to cause a supply side shock. Technically speaking, a rising channel from the low seen last month is now being tested and a break below there would pave the way for a significant decline. This appears to be a potential bear flag and should price take out recent lows around 63.80 then a retest of the area just below $60 a barrel could well follow. 

Oil is testing some potentially key longer term support and a possible bear flag can be seen on D1. Source: xStation 

 

 

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