Fall seasonality is in full swing and crude oil stocks are on the rise. Both the API and EIA inventory reports have showed massive supply spikes indicative of fading seasonal demand. From a fundamental perspective, it appears WTI crude oil may be in a position to test the $50.00 level sooner rather than later.
API, EIA Stocks Come In Stunningly Positive
Beginning with yesterday’s API report, the global oil market began to price excess supply into the markets. Earlier today, the buzz grew louder with a surprisingly strong EIA report. Here is a quick look at this week’s hard data:
Event Actual Projected Previous
API Crude Oil Stocks 10.50M NA 4.13M
EIA Crude Oil Stocks 9.281M 2.878M 2.927M
Each of these reports came in 6 million barrels above last week’s figures. This is a dramatic gain and one that may be the nail in the coffin for energy bulls in 2019.
November WTI Crude Oil Hovers Near $53.00
Thus far, November WTI pricing has yet to reflect the EIA data. A tight daily range has been the rule for today, with prices trading slightly to the bull. While traders appear at ease with the boost in inventories, the market remains firmly in bearish territory.
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Here are two levels to watch as we roll toward Friday’s closing bell:
- Resistance(1): 38% Bear Run, $54.24
- Support(1): Swing Low, $50.99
Bottom Line: At this point, a bearish bias toward WTI is warranted. Prices remain beneath the 38% Retracement ($54.24) of the current bearish trend. Until we see trade sustained above this level, a sudden plunge to $50.00 is a very real possibility.
If WTI receives a post-EIA bump from current levels, I will be looking to go short from just beneath the daily 38% Fibonacci resistance level. As long as the Swing Low ($50.99) remains the intermediate-term bottom, I will have sell orders queued up from $54.19. With an initial stop at $54.54, this trade produces 35 ticks on a standard 1:1 risk vs reward ratio.
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