The first inventory figures of the weeks from the API showed a massive drawdown, fuelling crude’s rally still higher through the Asia session.
The American Petroleum Institute (API) crude oil inventories added fuel to the oil fire overnight, reporting a massive draw of 5.1 million barrels against an expected draw of 1.4 million barrels. This saw Brent and WTI move still higher in New York with both contracts rallying one percent. Brent closed at 61.30 and WTI at 54.45, both near the highs of the New York.
That said, we sound a note of caution in Asia this morning as both contract’s daily relative strength indexes (RSI) have moved in to strongly overbought territory. Given the pace of the move and the generally bullish tone in the market, both contracts could be vulnerable to a short-term downward correction. The RSI has been an excellent indicator of these sorts of corrections in 2017.
Both crude contracts have continued to rally in Asia, spurred on by the news that Saudi Arabia will raise prices to two-year highs to Asian customers, and with OPEC compliance rising to 92.0%.
Brent Crude has edged 30 cents higher in early trade to 61.85 having earlier touched 62.00 with little to no technical resistance of note past this level. Support is at 60.50 and 60.00 with a break of that level signalling a deeper correction is possible to the 58.00 area.
WTI has raced 40 cents higher to 54.85 having touched 55.10 earlier in the session. A break of this level clears the road to around 56.00. A daily close above 54.70 is significant as WTI would finally have broken its long-term resistance zone between 53.50 and 54.70. Conversely, a break of 53.50 would signal a correction to at least 52.50 and possibly 52.00.