Oil drops further on surprise EIA build; Big breakout in play?

Summary:

  • DOE inventories: +2.4M vs -2.9M exp

  • First build in 8 weeks; US production rises

  • Oil and Oil.WTI both heavily lower as they extend earlier declines

 

The recent declines seen in the crude complex have seen both Brent and WTI fall below key prior support levels with the former falling to its lowest level since the start of the year in recent trade. A large part of these declines has already occurred today before the weekly DOE numbers hit, and when they did they didn’t offer much help to longs. The headline showed its first build in 8 weeks, unexpectedly rising against both the consensus forecast and the guideline from last night’s API.   

 

The report came in as follows:

  • EIA inventories: +2.4M vs -2.7M exp. -8.5M prior

  • Gasoline: +4.4M vs -1.3M exp

  • Distillates: +1.5M vs +0.5M exp

  • Cushing: -1.5M vs -1.6M API reading

  • US production: +12.3M vs +12.2M prior

 

Across the board it’s a pretty negative report on the whole for Oil, with not only the headline but several subcomponents showing worse than expected readings. The rise in US production is also not supportive of price and understandably the release was met with selling with the Oil price dropping to new lows.

Oil fell sharply by around 130 ticks in the minute following the inventory release, and while it has recovered a little since it remains heavily lower on the day by over 3%. Source: xStation

Oil has made a potentially key break lower in recent trade after dropping below the 59.15 level yesterday. As long as price remains below here then more downside is possible with little by the way of swing support until 50.55. Source: xStation

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