Oil Tanks As Price Slick Spreads

Oil gushed lower again overnight with both Brent and WTI taking out their early May panic liquidation lows and falling around 2 percent in the session.

This was despite OPEC/Non-OPEC’s compliance being announced at 106 percent and the American Petroleum Institute’s crude inventory draw coming in higher than expected at 2.72 million barrels. The inability of oil to stage even a modest dead cat bounce after these two data points must be a concern to producers although it may be that stop loss selling through the May lows overwhelmed both.

From a technical perspective, the picture continues to look ugly with the short end of the oil curve being overwhelmed by increased production from exempt Nigeria and Libya along with OPEC’s perpetual migraine, U.S. shale. Producers will be looking with some trepidation now at the official U.S. EIA Crude Inventory Report where the street is forecasting a 2 million barrel drawdown in crude and a gain of 0.1 million in gasoline inventories. A positive increase on either almost certainly seeing an uncapped leak of crude prices lower.


Brent spot trades at 45.85 this morning with resistance at 46.60 and 47.65. Support lies in the 45.10/45.30 region with a break of this area implying the slick could spread to the November lows of 43.00.

WTI spot trades at 43.25 this morning with resistance at 44.00 and 45.00. Interim support lies at the overnight low of 42.70 with the November low at 42.00 clearly in traders crosshairs.

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.

Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.