Oil jumps after inventory draw; Is a longer term bottom forming?

Summary:

• Oil turns positive after drop in inventories

• DOE: -3.1M vs -1.3M exp; API: -0.8M

• US production also falls by 100k barrels

A bigger than expected drop in the weekly US inventory figure has caused a swift move higher in the oil benchmarks with both Brent and WTI rallying since the release. After a bumper day of gains yesterday, the markets had pulled back a little ahead of the data, but an all-round positive release has sent price back up near Tuesday’s highs.

WTI has gained since the DOE inventory release. The level around 54.60 could be seen as potential resistance although traders should keep in mind that the market rolled over last night so prior levels may not be as accurate as previously assumed. Source: xStation    

Looking at the release itself, the following data was announced:

• Inventories: -3.1M vs -1.3M exp. +2.2M prior

• Gasoline: -1.7M vs +0.5M exp

• Distillates: -0.6M vs +0.4M exp

• Refinery utilisation: +0.7% vs +0.34% exp

• Production: 12.2Mbpd vs 12.3Mbpd prior

Looking at longer term charts, the outlook for crude oil is beginning to appear more constructive. Price is once more now probing its highest level in a couple of weeks and is also above the 8 period EMA (blue line). The 8 remains below the 21 EMA (yellow line) which could be seen as indicative but the recent gains do suggest that a possible bottoming pattern is being carved out.  If price can make a clean break above 54.57 Lows around 50.65 remain potentially key support.

There are some signs that the Oil market is attempting to form a bottom but longs would like to see a break above the 54.60 and also the 21 EMA before a sustained recovery can occur. Source: xStation