Oil jumps after large inventory draw in choppy trade

4:36 PM July 24, 2019

Summary:

  • Crude oil inventories show large drop (-10.8M)

  • Draw down similar to API and 2nd largest this year

  • Oil rallies to daily highs but lacks clear direction since

 

The weekly crude oil inventories have shown a big drop in US stockpiles and sent the price of Oil up to its highest level of the week. In fact the print of -10.8M is the 2nd largest negative reading so far in 2019 but given that it is broadly in line with last night’s API equivalent it could be seen as not that much of a surprise.

The price of Oil jumped after the release but has since pulled back in typically volatile trade. The lasting impact of this release is yet to be seen on the market and the next few hours could be telling. Source: xStation 

 

The components of the DOE report were as follows:

 
  • Crude oil inventories: -10.8M vs -4.2M exp. -3.1M prior

  • Gasoline: -0.2M vs -1.4M exp

  • Distillates: +0.6M vs -0.9M exp

  • Refinery: -1.3% vs 0.1% exp. -0.3% prior  

  • Production: 11.3 Mbpd vs 12.0Mbpd prior 

 

On the whole most the subcomponents are fairly mixed but the drop in production could be seen as supportive of the headline read and bullish for the price of Oil. 

 

The market from the perspective of a daily chart looks like we could be at a turning point with price moving back to the 8 and 21 EMAs. These are currently in a negative orientation but not too far apart, so it would not take much upside for them to print a bullish cross. At times like these the trend is least clear so the risk is higher, but also the return is greater than usual if the next move is called correctly. The fact that price has moved above Tuesday’s high can also be seen as constructive with today’s low of 63.72 potentially seen as support. Today’s closing level could also be seen as key in determining were the market heads next. 

 

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