A Huge Build Reported In EIA Crude Oil Stocks

A seasonal build in crude oil stocks has proven to be the norm for fall of 2018. Weekly inventories have been consistently growing since late September, with today’s EIA report being the largest yet. Given the fundamentals facing global oil, is $50.00 in the cards by Christmas?

The EIA Report Is In…

Before we get on with the inventories numbers, it is important to note that trading volumes have rolled over from the December to January WTI crude oil futures contract. Today marks the first full session of emphasis on January WTI, with prices rotating just beneath $57.00 per barrel mark.

Here is a look a this week’s inventory stats:

Event                                         Previous    Projected   Actual

API Crude Oil Stocks                   7.83M           NA             8.79M

EIA Crude Oil Stocks                    5.78M        3.18M         10.27M

The 10.27M EIA supply figure has shattered expectations and almost doubled that of last week. Of course, price is not cooperating, as January WTI is up modestly on the session. However, the sentiment is shifting and prices are beginning to fall. We may be in for a late-session selloff, so stay tuned!

January WTI Technicals

Yesterday’s green daily candle put a stop to the brutal losing streak for WTI. As of yet, it remains to be seen if this was due to a bullish outlook or to the split in volumes between the December/January futures contracts. One thing is for sure ― until we see a test of the $60.00 topside level, a bearish bias is the only way to go.

Here are the two levels on my radar for the remainder of the week:

• Resistance(1): 38% Current Wave Retracement, $59.94
• Support(1): Psyche Level, $55.00

Bottom Line: As long as the swing low of $57.90 remains valid, I will have sells in the queue from $59.89. With an initial stop at $60.26, this trade produces 35 ticks on a sub-1:1 risk vs reward management plan.