WTI Crude – Staying Buoyant Despite Sharp Inventory Build Up

WTI Prices are back up again due to increased tension between Ukraine and Russia, aided by broad bullish risk trends during yesterday’s US session when stocks snapped a 3 day decline. Prices is now tapering lower but the pace of decline is mild, fitting the bill of a temporary bearish pullback rather than an outright reversal. This is impressive when we take into consideration the fact that the weekly report furnished by American Petroleum Institute is extremely bearish, reflecting a 7.08 million barrels inventory build up when analysts were expecting a mild 0.75 million gain. Given these, it seems reasonable to believe that underlying sentiment in WTI Crude is bullish.

Hourly Chart


If the assertion above is true, then it is possible that prices may rebound off 102.0 round figure support level which happens to be the swing high last Friday instead of pushing down all the way to Channel Bottom. Even if 102.0 fail, 101.5 may come to the rescue, allowing price to rebound back up towards Channel Top. It is even entirely possible that prices may simply revert higher from here, a scenario that Stochastic indicator suggest may be possible given that Stoch level is currently where previous reversals were seen in the past 5 trading days.

Daily Chart


Daily Chart shows prices pushing towards 103.0 resistance, and it seems that bias is towards the upside as latest rally has formed a higher high, affirming the bullish momentum from 17th March even if we trade lower from here. Hence, even in the case where prices push towards 101.0 in the short-run, we should be able to find ample support which will propel prices back up to 103.0 and potentially an even higher high. Even in the event that 101.0 fail, rising trendline will provide support which will open up the same bullish target mentioned earlier.

However, it should be noted that overall bullish trend is not affirmed yet, as price will need to clear the 2014 high of 105.5 as confirmation that WTI is bullish in the long-run. This scenario is hard to fathom for now as Stochastic indicator is currently close to the Overbought region, suggesting that prices may find significant resistance around the 104.0 level. Also, fundamentals do not support continued rally in WTI Crude as demand within US and globally in 2014 should be lower than initial estimates as manufacturing activities across major developed and emerging economies (bar UK) have came in short. As such, we should naturally expect WTI prices to head lower moving forward especially since US aims to increase supply steadily until 2015. Furthermore, with Stock prices looking precarious, there is additional downside risk for Crude as risk trends will naturally be bearish should a huge sell-off in stocks occur.

Hence, traders who want to participate in this bullish momentum need to be aware of the potential risks, but it is possible that bullish momentum could still send prices higher for decent profit to be made in the short-term. Conservative traders should keep a look out on DOE Inventory Report which will be released later before New York noon, and use the reaction to gauge whether sentiment is still indeed bullish before participating in this rally.

More Links:
Gold Technicals – Heading Towards 1,315 Resistance
S&P 500 – Back Above 1,850
GBP/USD – Pound Soars After Sharp UK Manufacturing Data

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu