Crude Oil Slips Despite -12.6M Barrels Draw – What’s Going On?
Arslan Butt • 2 min read
Fellas, it’s been quite a volatile session for WTI crude oil yesterday as the prices fell by around 380 pips after the EIA reported a draw of -12.9M barrels. Here are a few things that we need to know about the market.
Crude oil prices gained a bullish momentum to trade above $70/ barrel, despite OPEC’s decision to increase output by 1 million barrels. There are multiple reasons behind this, let’s speak about them…
1) EIA Stockpiles Report
On Tuesday, the Energy Information Administration (EIA) reported a draw of 12.9 million barrels for the week ending on July 06. This shows a massive increase in the demand for crude oil during the previous week. Perhaps, the speculators increased their bets on oil on the sentiments of Iran’s sanctions.
2) Libya to Hike Output
Libya announced it would call off restrictions on exports which will lead the output to normal levels from close to 0.5M bpd to 1.3M bpd. Therefore, despite the EIA report, the sell-off intensified on the market sentiment.
3) Saudi Arabia Increases Production
Looks like Saudia is influenced by President Trump’s call for lower prices. Saudi Arabia output has also risen by 0.7M bpd to 10.7M bpd in June. Increased production leads to downward pressure on prices.
What’s on the technical side?
As you can see on the daily chart, crude oil broke out of an ascending triangle pattern at 72.50, but also entered the overbought zone. You can see the RSI, literally, it was trading above 90.
Crude oil has already retraced back to 38.2% retracement level at $70.75 and 20 periods MA is extending it a strong support near $70.28.
So can we expect a reversal now?
I don’t think so. Do you see a bearish engulfing candlestick pattern? It’s signifying a strong selling intention of traders. That being said, crude can continue its bearish momentum until 50% ($69.39) or 61.8% ($68.03) retracement levels.
WTI Crude Oil – Trade Plan
The trade idea is to stay bearish below 71.61 with a stop above 71.95 and take profit at 76.40. Good luck!