WTI Crude

EIA Reports A Major Draw On Crude Oil Supplies

Posted Wednesday, July 11, 2018 by
Shain Vernier • 2 min read

The weekly crude oil inventory cycle is complete and it was not pretty. Both the API and EIA stocks reports came in extremely negative, showing large draws on supply. Nonetheless, August WTI crude oil futures are down for the session, trading beneath the $73.00 handle.

Predicting price action immediately following an EIA release is tricky — it seems that the inventories statistics often go ignored until later in the week.

EIA Crude Oil Stocks

Following yesterday’s API report, the EIA released their inventory statistics to the public earlier today. For the past several months, these numbers have varied greatly from industry projections. This week has certainly stuck to that trend:

  • The API Crude Oil Stocks report came in at -6.796 million barrels, down from last week’s -4.500 million.
  • The EIA Crude Oil Stocks report came in at a staggering -12.633 million barrels for the week. This number shattered industry projections of -4.489 million and last week’s surplus of 1.245 million.

If there has been such a large one week draw on supply, then why are WTI prices heading south? The big reason is news out of Saudi Arabia. Production for June spiked significantly, upwards of 500,000 barrels per day. Traders have latched on to this piece of news, predicting a glut of oil to hit the market in coming months.

One thing is for sure — today’s EIA draw was the largest since 2016. If WTI continues to sell-off toward the weekend, the top for 2018 may be in.

WTI Crude Oil Technicals

After a post-EIA whipsaw period, August WTI crude futures have broken to the bear. Price is trending down, beneath $73.00. Can this market test support on the daily time frame?

August WTI Crude Oil Futures (CL), Daily Chart
August WTI Crude Oil Futures (CL), Daily Chart

Here are the key support and resistance levels to watch for the rest of the day:

  • Resistance(1): Psyche Level, $75.00
  • Support(1): Bollinger MP, $70.89
  • Support(2): 38% Retracement, $70.77

Bottom Line: The EIA Crude Oil Stocks report should have brought an immediate test of $75.00. This did not occur. As of now, WTI long-term bulls are well advised to proceed with caution.

For the rest of the week, buys from above support will be a solid entry with the daily uptrend. Longs from $70.91 with an initial stop at $70.44 are a good way to play rotation back toward the $73.00 value area. Using a standard 1:1 risk vs reward management plan, this trade yields 47 ticks.

Be sure to check out the Comments section below for updates on the fast-moving crude oil market as it develops.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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