3rd consecutive DOE draw fails to boost Oil

Summary:

• DOE inventories -4.3M vs -2.2M exp and -2.6M prior

• 3rd drop in a row and overall inventories at lowest since Feb 2015

• Despite this Oil has fallen lower in the initial reaction

The weekly crude oil inventories have shown another decline but despite this the price of Oil has fallen lower with the risk-off flows evident in stocks weighing on the market. A headline print of -4.3M was lower than both the consensus forecast for a reading of -2.2M and also lower than last night’s API which showed a decline of 1.2M. It is now 3 consecutive weeks of declines for this gauge of oil stockpiles and this has resulted in the overall level of US crude stock dropping to its lowest level since February 2015.

The following shows the components of the release in the form of actual vs expected unless otherwise stated:

• Gasoline: +1.8M vs -1.5M

• Distillates: +3.1M vs +0.7M

• Cushing: +0.5M vs +0.1M prior

• Production unchanged at 11.0 mbpd

Most of these could be seen as negative for the oil price and judging by the initial reaction this is outweighing the impact of the draw in the headline. Price has tumbled around 130 ticks in the minutes since the release with price falling from a high of around 77.57 to 76.30.

Oil has declined since the DOE release with the market dropping sharply in the 35 minutes that followed. This comes despite a large drop in the headline and could be caused by both some negative sub-components and a general risk-off feel that has seen indices decline today. Source: xStation     

The bigger picture for crude remain little changed with the broad range from 70.50-80.50. This $10 range has contained now contained price for 5 months and although there was an attempt to break higher earlier today, this was met with a pretty firm rejection. Tuesday saw a large bearish inverted hammer print on D1 and this marked a turning point nicely with the market pulling back since and now looking on track for a 3rd successive day of declines. Within the range the rough midpoint around 75.55 has provided some shorter term swing support and resistance but overall the more significant levels remain 70.35 and 80.50.

Oil has dropped lower after printing an inverted hammer on Tuesday. The broader $10 range from 70.50-80.50 that has contained price for 5 months remains in tact for now. Source: xStation