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The weekly crude oil inventories cycle is complete and seasonal supply appears to be returning to normal levels. A bit earlier, the EIA Crude Oil Stocks report came in below expectations, at -3.963 million barrels. Energy traders are treading lightly following the news, with June WTI crude oil futures entering rotation near $62.00.

The EIA Crude Oil Stocks Report Returns To Seasonal Norms

Today’s EIA release came as a bit of a surprise to industry analysts who predicted yet another build in supply. Here is a look at this week’s oil inventory cycle:

Event                                     Actual     Projected        Previous

API Crude Oil Stocks           2.806M         NA                 6.810M

EIA Crude Oil Stocks          -3.963M       1.215M           9.934M

Each of these figures showed a dramatic week-over-week decline. However, the EIA report reveals almost a 14 million barrel swing in stocks. This is a major shift and suggests that consumption is gaining steam as the summer months approach.

A Pending Breakout In WTI Crude?

The daily chart for June WTI crude oil features a pennant formation setting up in the vicinity of $62.00. This is the first two-session pennant to set up in quite some time. As of now, it appears that a directional move in price is on the way.

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

Here are the levels to watch for the near future:

  • Resistance(1): Bollinger MP, $62.71
  • Resistance(2): Daily SMA, $64.52
  • Support(1): Psyche Level, $60.00

Bottom Line: The presence of a daily pennant in June WTI crude is a strong indication that prices are going to break to $64.00 or beneath $60.00 by Friday’s closing bell. In the event this market breaks out from Tuesday’s range (High: $62.49 Low: $60.66), joining the prevailing 30 or 60-minute trends will be a good way to get in on the action.

For the rest of today, going long from $62.50 is a solid scalping location. Using a basic 1:1 risk vs reward ratio, this ultra-short term scalp is worth a fast 8-12 ticks.

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