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XTB TRADEBEAT

Unexpected build in DOE but Oil looks to recover from recent declines

Summary:

  • DOE inventories of +1.9M vs -2.1M expected
  • Build below last night’s API number (+6.5M)
  • Brent Oil dips towards 2-week low post-release before recovering

The weekly DOE inventories release has seen another build in the headline reading with a print of +1.9M following last week’s +2.2M. This number is a clear negative when compared to the consensus forecast for a decline of 2.1M, but relative to last night’s API figure of +6.5M it appears to be not quite so bad. 

The inconclusive nature of the report can be seen in the immediate market reaction with price experiencing some wild swings and briefly falling back towards its lowest level in a fortnight before attempting to surge higher.

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 Brent Oil dipped initially on the release but has since recovered to trade near it’s highest level of the day. Source: xStation

Taking a longer term approach, it has been a year of declining inventories on the whole with 2017 the only year in the past 6 to see the present levels of inventories below the level at the start of the year. 

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 US inventories have dropped so far this year. The previous 5 years have all seen higher inventories at the equivalent point in time. Source: XTB Macrobond

While the decline in inventories is seemingly supportive of the oil price the rise in US production is not. Following the hurricane-effected drop seen back in September production has bounced back once more and is currently close to its highest level in recent years. There has also been a notable recovery seen in the US rig count since last summer’s low and traders will be looking keenly to the Baker Hughes rig count release on Friday evening. 

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 US oil production remains close to its highest levels in recent years. Source: XTB Macrobond

A longer term chart on Brent reveals that even with the recent pullback the market appears to be in a longer term uptrend. 61.20 could be seen as a potential support zone given that this is the level where price broke higher from at the start of the month. As far as resistance goes, the recent highs of 64.64 are a level to keep an eye on. 

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 The market remains in a longer term uptrend even after the recent declines. Source: xStation

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