EIA Reports Drop In Crude Oil Supplies

Historical seasonal trends continue to be proven wrong by the global crude oil complex. Earlier today, the EIA reported another drop in inventories ― the second this month. WTI futures have responded by holding their ground above the $60.00 threshold. For the time being, it looks like bullish crude oil is the late-year story of 2019.

EIA, API Report Conflicting Crude Oil Stocks Figures

This week is the final full week of the trading year. In addition, it is the last time in 2019 we are to receive a normal crude oil inventory cycle. Next week will bring disruption due to the observance of the Christmas holiday.

Here is a brief look at this week’s stocks numbers:

Event                                               Actual     Projected     Previous

API Crude Oil Stocks                     +4.70M           NA             1.41M

EIA Crude Oil Stocks                     -1.085M     -1.288M       0.822M

While the API indicated that fall/winter seasonality is in full swing, the EIA numbers painted a much different picture. It appears as though holiday season demand for refined fuels continues to influence U.S. supply levels. This will be a trend to watch for next week and may be a potential catalyst for bullish WTI pricing going into the 2 January 2020 session.

All in all, 2019 has been an atypical year for WTI crude oil. Prices bucked historical trends in both the late spring and fall, sending many traders to reevaluate the market as a whole. In the global energy complex, anything can happen; right now, it appears as though the long-term bearish trend in WTI may be in jeopardy.

With expiration tomorrow, the weekly chart above is a final look at January WTI crude oil futures. Below are the corresponding levels for February WTI crude contract to be especially aware of:

• Resistance(1): 62% Retracement of 2018 Sell-Off, $62.05
• Resistance(2): 2019’s High, $63.87

Bottom Line: Although Thursday is officially the final day for January WTI to trade before expiry, volumes are already on the February issue by a 6/1 margin. For intraday trading, it is best to target the February WTI contract as it features far superior liquidity. 

Until elected, I will have sell orders queued up from $61.99 in February WTI futures. With an initial stop at $62.54, this trade yields 55 ticks profit on a basic 1:1 risk vs reward management plan.