Summary:
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Instead of expected drop in inventories DOE report showed a decent build
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Brent (OIL on xStation5) may be set to test the $77.50 handle
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Indecisiveness seen on the WTI (OIL.WTI) weekly chart
This week’s DOE data on crude oil inventories came one day later than usual due to the Independence Day holiday in the US yesterday. The API data released on Tuesday showed a bigger-than-expect drop in oil inventories supporting prices of the “black gold”. However, data released today signalled a decent build. In turn we are observing Brent and WTI pulling back from intraday highs.
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Since the beginning of the year US oil inventories sit well below the 5 year average. Moreover, in 2018 we are observing the smallest inventories in a whole decade. Source: xStation5
Today’s DOE reading was expected to show a major decline of 5.17 mb. The actual reading did not bode well for buyers as instead of major drop we saw a moderate build of 1.24 mb. What may be pleasing for the oil bulls is that we saw a drop of 1.5 mb in the gasoline inventories against expectations of just 0.1 mb decline. It is important as recently gasoline inventories remained significantly above its 5 year average. When it comes to the distillate inventories instead of an expected drop of 146k we saw a minor build of 134k.
Details of DOE report:
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Crude Oil Inventories: +1.245 mb vs exp. -5.174 mb
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Gasoline Inventories: -1.5 mb vs exp. -0.126 mb
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Distillate Inventories: +134k vs exp. -146k
Brent (OIL on xStation5) has pulled back from its intraday highs following the DOE publication. The price may be set to test the support level at $77.50 therefore investors should pay attention to this area. Source: xStation5
In response to the DOE report both Brent and WTI pulled back from their intraday highs. Brent may be set to test the support level at $77.50 handle that coincides the 8-day moving average can be found. Do notice how the spread between Brent and WTI has narrowed recently on the back of the Iranian case. Unlike Brent WTI has managed to break above its prior local high at $72.90. However, after testing the 50% retracement level of the mid-2014 to early-2015 slump the price pulled back towards its prior high.
Taking a look at WTI (OIL.WTI on xStation5) from the weekly point of view we can see that the price failed to break above the 50% retracement of the major slump started in mid-2014. Moreover, the sellers were unable to push price below the prior local high at $72.90. In turn this week’s candlestick took form of a doji signalling indecisiveness of investors. The direction of a weekly close may be decisive for price movements in the nearby future. Source: xStation5
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