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XTB TRADEBEAT

Oil falls into the red on the year as inventories and production rise

Summary:

  • Oil declines following latest inventory data
  • DOE release showed build of 1.9M and US production eclipses Saudis 
  • Crude price lower on the year

The Oil price has taken a turn for the worse this afternoon after the latest economic data showed a rise in the DOE inventories whilst US production overtook that of Saudi Arabia! The weekly DOE release showed a build of 1.9M barrels and whilst this was less than both the consensus forecast of 3.2M and the prior reading of 6.8M it was well above last night’s API print which showed an unexpected drop of around 1M. 

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 US production has overtaken that of Saudi Arabia for the first time since the early 1990s. Source: Zerohedge

 Whilst the build itself is mildly bearish for the price of Oil, the US production are a clear negative with another increase seen here. US production hit a record high of 10.25M barrels per day which surpassed its on monthly high set all the way back n November 1970 as well as the current production of Saudi Arabia. This shows that whilst the Saudi-led OPEC are cutting their output in an attempt to support price, a lot of this slack has been picked up by US shale as they have increased output as price has risen. 

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 The market reaction to the news has been clearly negative with Brent Oil falling around 100 ticks in the 30 minutes since the release. Source: xStation

Brent Oil has been sat near its highest level in over 3 years in recent weeks but we have been warning that the market could be susceptible to correct lower, due in part also to an extreme level of long positioning. This week two potentially big negative technical developments have happened for Brent Oil with price first falling below prior support around the 68.00 level and secondly the 8 and 21 EMAs printing a bearish cross. There is now a fairly clear run lower to 64.71 and how the market reacts should it get there will determine whether it finds support or continues lower towards 61.15. 

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 The outlook has turned more negative for the market this week after breaking below 68.00 and printing a bearish cross on the 8 and 21 EMAs. Source: xStation 

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