EIA Crude Oil Inventories Surprise, WTI Plummets

Another week, another surprise in the crude oil inventory cycle. Today’s EIA Crude Oil Inventories report has been released, prompting wild action in the oil markets. The numbers are far from expectations and WTI crude pricing is reacting accordingly. If you are trading oil, have your stops down and leverage in check!

The EIA Crude Oil Inventories Report Is Out

The reports are in and once again they are mixed. Here is a look at the hard data:

• Tuesday’s API Crude Oil Stocks report came in at -1.300 million barrels, well below the previous release of +4.854 million.
• Wednesday’s EIA Crude Oil Inventories came in at +5.778 million barrels, high above projections of -1.567.

The EIA reported a weekly surplus of 5.778 million barrels, over 7 million barrels more than expected. North American fracking operations coming online during the Spring months is the culprit. Be on the lookout for more of these surprise EIA surplus reports as we get deeper into the Summer months and oil production spikes.

Each report was dramatically different than consensus expectations. While the EIA report is the premier market-mover in the oil industry, the API does have influence. It will be interesting to see if the industry consensus begins to favor surpluses in both as June kicks off.

WTI Crude Oil Technicals

The surprise surplus of crude has brought sellers to the July WTI futures market in droves.

There are several downside support levels to be aware of as the session unfolds:

• Support(1): 38% Retracement of Current Wave, $70.56
• Support(2): Bollinger MP, $69.74
• Support(3): Daily SMA, $68.86

Bottom Line: For the remainder of the session, long scalps from $70.61 are high probability trades to the bull. Using a 1:1 risk vs reward plan with an initial stop at $70.49, this setup is worth 8-12 ticks.