WTI Crude fell strongly yesterday, closing close to the 94.0 support on the back of the American Petroleum Institute report which showed crude oil stocks rising by 1.1 million barrels. Gasoline fell by 480,000 barrels versus expectations of a 700,000 fall. Distillates did one better, climbing 1.92 million barrels vs an estimated 700,000 barrels. The increasing stocks across crude and related products highlight the decreasing demand in energy. Besides the API report, the strengthening of USD due to higher S&P 500 did not help matters either, pulling commodities as a whole lower.
From a technical perspective, the breaking of 94.0 which happens to be the confluence with the rising trendline suggest that price may proceed with further correction towards 90.0 which is the last vestige the rally from April low to May high which is still currently in play. Stochastic readings agrees with a possibility like this, where a bear cycle is already underway, the question would be how far price may move lower. Fibonacci Retracement may provide some guidance, with the 38.2% Fib, 50.0% Fib and 61.8% Fib retracement confluence with various structural supports, suggesting that there may be considerable resistance against bearish advance at these levels.
Short-term chart also suggest that an acceleration towards the bear front may be underway with price breaking Channel Bottom. Price has also broken below the previous swing low of 93.70, with last Friday’s low the next short-term target. Stochastic readings suggest that a bear cycle is underway, but there isn’t much more legroom for this current cycle before entering the Oversold region, which suggest that 93.0 may find short-term bullish support, but that is not really new information, as it was already reflected via the Daily Chart.
Outside of US, rising output is also from the Organization of the Petroleum Exporting Countries (OPEC), which puts tremendous pressure on Crude Oil prices. The only saving grace for WTI is that Cushing Oklahoma pipelines have eased significantly compared to last year. This has allowed the Brent/WTI spread to decline significantly, but does nothing to stop the slide due to decrease global demand. With global supply potentially increasing, the outlook for Oil is certainly down. Consider that this decline happened when risk appetite is high, should stocks start to slide down, crude oil may take an even bigger hit.
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