Skip to content

XTB TRADEBEAT

Larger than expected DOE draw fails to boost Oil prices

Summary:

  • Weekly DOE inventories -5.6M vs -3.2M exp and -3.4M prior
  • US production increases by 25k to 9.71M - record high
  • Oil.WTI drops lower by more than 1% on the day

The latest inventory data from the US has seen another drop in the weekly reading, this time by 5.6M barrels. Against consensus calls for a -3.2M print after a previous reading of -3.4M today’s number is clearly a positive, but other parts of the release don’t look so good for oil bulls. 

On an annualised basis, today;s decline has seen the current level of DOE inventories fall below the equivalent in 2015. After beginning the year far higher there has been a fairly steady downtrend over the past 6 months which first saw the level fall below last year’s back in the summer before dropping further today. 

link do file download link

 US Oil inventories continue to decline and have now fallen below the equivalent level from 2015. Source: XTB Macrobond

First off, the consensus forecasts are taken from surveys conducted a few days in advance of today’s release and therefore last night’s API number can often be a more accurate gauge of what the market really expects. Tuesday’s API reading of -5.5M was in fact very close to today’s DOE number and what’s more a large build in gasoline inventories in the API (+9.2M) was supported in today’s DOE (+6.8M).

Furthermore the latest US oil production numbers, released at the same time as the DOE, rose to record highs. A weekly increase of 25k barrels is relatively small, however it adds to recent high levels of production and makes a new all-time high of 9.71M.

link do file download link

 US oil production rose to a record peak in the latest data. Source: Bloomberg

In terms of market reaction there hasn’t been an immediate clear move in OIL.WTI which popped slightly higher before returning back towards its lowest levels of the day. The market has today traded below the 21 period EMA for the first time in almost 2 months and given the extreme level of long positioning, the chances of a deeper correction appear to be increasing. The 23.6% and 38.2% fib at 55.03 and 52.58 coincide with prior swing levels and could be seen as possible supports should price turn lower. 59.00 remains potential resistance. 

 link do file download link

 Oil.WTI has dropped lower today and could be set for a deeper correction. Source: xStation

 

Disclaimer

This article is provided for general information purposes only. Any opinions, analyses, prices or other content is provided for educational purposes and does not constitute investment advice or a recommendation. Any research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk, we do not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.