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XTB TRADEBEAT

Surprise DOE build sends Oil.WTI lower to test support

Summary:

  • DOE crude oil inventories 2.2M vs -1.6M exp
  • US oil production increases further (+46K to 10.586m bpd)
  • Oil.WTI drops to test prior support at 67.30

 The latest inventory figures from the US for oil have done little to support the price, with an unexpected build seen alongside an increase in production. The weekly DOE headline figure showed a rise of 2.2M compared to a forecasted print of -1.6M, with the prior reading -1.1M. The "consensus" forecast is normally given ahead of the API release and this often acts as a more accurate gauge of market expectations of late. Last night’s API reading showed a rise of 1.1M and compared to this the reading is not quite so negative.

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 US inventories have slipped below their 5 year average recently, but they remain towards the middle of the overall range. Source: XTB Macrobond 

Looking more closely at the components of the report, it looks pretty negative on the whole with the gasoline (+0.8M vs -2.0M prior) and Cushing (+0.5M vs -1.2M) readings both turning positive. Perhaps even more importantly US production increased further in the past week with a rise of 46k seeing total production in terms of barrels per day rise to 10.586M.  

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 Oil.WTI has fallen since the release but prior support around 67.30 has stood firm so far. Source: xStation

Turning to the market reaction it could be described as a little mixed with the initial drop seeing buyers step back in. Oil.WTI fell down to test prior support around 67.30 shortly after the release but buyers stepped in around there and there was a bit of a bounce. The longer term picture remains one of an uptrend, and although there’s been some possible reversal signals of late (see our Oil.WTI technical overview that was written before the data here) the bulls appear to be holding on for now. 

As always with this release there can be high level of volatility surrounding it and lots of noise, so it will be important to see where price settles this evening once the dust has settled. A close below 67.30 could be seen to pave the way for a deeper correction but if the market can dismiss this seemingly negative news and march higher then more highs could follow. 

 

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