Massive Drop in the WTI Crude Oil, Who’s Behind this?
Dave Green • 1 min read
Yesterday in the New York session, we saw a drastic slump in the prices of the energy market, particularly the WTI crude oil. I’m sure that the buyers can feel the pain since it fell more than 280 pips, smashing all the hurdles to place an intra-day low of $50.03.
2 Major Factors Behind This
Crude Oil Inventories
In the 8th of March Morning Brief, we discussed major events to watch out for. It's true that even I wasn't expecting the extensive fluctuation in the oil inventories. Surprisingly, the crude inventory figures came out four times larger than that of the forecasts. The Energy Information Administration (EIA) reported 8.21 million barrels, whereas economists were expecting only 1.1 million.
China – The 2nd Largest Oil Consumer
China, the largest consumer of crude oil after the U.S, lowered their growth forecast to 6.5% in 2017. This means that we may have less demand for crude oil from the 2nd largest oil consumer. This is likely to increase supply in the market. More supply ultimately leads towards weak prices.
Technical Outlook & OIL Signal
At the moment, WTI crude oil is holding above a psychological support level of $50. The RSI has already come out of the oversold territory and it has completed a 23.6% Fibonacci retracement on the 30 – minutes chart. Investors are recommended to have their buying positions only above $50 with a tight stop loss below it.
Alternatively, placing sell stops below $50 with a target price of $49.20 will be an excellent idea.