- DOE inventories -4.9M vs -3.9M exp and -7.4M prior
- Smaller decline than last night’s API reading of -11.2M
- Brent Oil remains close to 3-year high
The weekly DOE inventories have shown yet another drop with a reading of -4.9M against consensus forecasts for -3.9M and a prior reading of -7.4M. On the face of it this represents another larger than expected decline and marks 8 straight weeks of drawdowns.
However, upon closer inspection the reading may not actually be that bullish for the the oil price. First off the decline of 4.9M is far smaller than last night’s API drawdown of 11.2M and given that the consensus forecasts were taken prior to the API release, some traders believe the API represents a more accurate reflection of market expectations.
The market reaction saw price fall back to where it was prior to last night’s API release at 68.76 before recovering to print a long doji on M30. Source: xStation
A closer look at the components of the report also raises some concerns with the Distillate inventory change (+4.3M vs +1.5M exp) and the gasoline equivalent (+4.1M vs +2.6M exp) both rising by more than forecast.
Brent Oil has made a strong start to the year with the benchmark hitting its highest level since May 2015 earlier on today. The market has moved above the $69 handle and is not far from the peak from May 2015 at 69.61. A break above here could be seen to mark another hurdle cleared and would leave little by the way of prior resistance for quite some time overhead. On the other hand a reversal around these levels may see a pullback given the strong run higher seen in recent months. A high level of speculative longs could also contribute to an acceleration of any decline should price begin to fall.
Brent is now not far from the peak seen in May 2015 and a break above 69.61 would leave little by the way of overhead resistance for quite some time. Source: xStation
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