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XTB TRADEBEAT

Oil sinks on large DOE build

Summary:

  • DOE inventories +5.8M
  • Far above both the expected -2.5M and prior -1.4M
  • Oil falls sharply in the immediate reaction

The weekly DOE inventories always feature prominently on the economic calendar of oil traders, and this afternoon’s release is a good example of the impact it can have on the market. The print of +5.8M was well above both the expected (-2.5M) and the prior (-1.4M) and also represents a large beat on last night’s API equivalent (-1.3M). 

The components from the report were as follows in the format of actual vs expected:

  • DOE inventories: +5.8M vs -2.5M 
  • Gasoline: +1.9M vs -1.4M
  • Distillates: -1.0M vs -1.3M 

Overall this is clearly a negative shock for the oil price with significantly higher readings than expected in the headline and gasoline while distillates also topped forecasts. Another area of the release that trade focus on is the production figure which has been rising for some time, although this time out it has come in unchanged.

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 Oil has dropped sharply since the release, falling by almost 100 ticks in less than 15 minutes. Source: xStation

The daily outlook for Oil has shown some signs of exhaustion in recent session with two inverted hammers seen with highs of 80.47. This could be a potential double top and is showing that on the two occasions that price has made a foray above the $80 mark it has been hit with some selling. If 80.47 remains unbroken then a pullback may lie ahead with fib retracements offering potential levels to target for shorts. The 23.6 is the first of note at 76.06 but the 38.2% at 73.344 has had more significance as far as previous price action is concerned. 

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 Oil has run into some resistance of late with the highs around 80.48 attracting strong selling pressure. If these remain in place then a pullback may occur with Fibs offering possible targets for shorts. Source: xStation

A technical overview of Oil.WTI can be found here.

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