EIA Reports Massive Draw On Supply

This week’s oil inventory cycle is in the books and seasonality is dominating supply levels. Both the EIA and API Crude Oil Stocks reports came in extremely negative, posting massive week-over-week draws. At this point, the markets appear to have anticipated the weak figures. September WTI has reversed since this morning’s EIA report at 10:30 AM EST, falling beneath $56.50. 

EIA Reports A Massive Draw On Supply

A bit earlier, the U.S. Energy Information Administration (EIA) rounded out this week’s inventory cycle. The EIA’s figures dramatically underperformed expectations, suggesting that summertime seasonal trends in consumption are finally taking hold. Here is a quick look at this week’s numbers:

Event                                    Actual      Projected   Previous

API Crude Oil Stocks         -10.961M        NA             -1.401M

EIA Crude Oil Stocks         -10.835M    -4.011M        -3.115M

Reports like the ones above are a great example of why trading WTI based solely on inventories is a challenge. These figures suggest growing scarcity and imply that WTI pricing should receive a bullish bounce. However, this has not been the case; following a run at $58.00 immediately following the EIA release, sellers have driven the market south.

September WTI Futures: Technical Outlook

There isn’t much rhyme or reason to today’s action in September WTI futures. Prices are falling rapidly in response to the extremely weak inventories numbers.

Overview: The key level for September WTI is the 62% Macro Wave Retracement at $54.77. As long as this market holds firm north of $54.77, the daily uptrend of June will remain technically valid.

For the long-term, it is tough to have any confidence that WTI will rally from current levels. Today’s EIA numbers should have drawn some bids to the market. Unfortunately for oil bulls, the rally fell flat very quickly.