EIA: Crude Oil Stocks Plunge By 7.493 Million Barrels

Posted Wednesday, July 15, 2020 by
Shain Vernier • 1 min read

Earlier, the U.S. Energy Information Agency (EIA) released its weekly oil stocks report to the public. The EIA’s figure came in at -7.493 million barrels, well above projections (-2.098M) and last Wednesday’s number (5.654M). While not a surprise given summertime seasonality, a 10 million barrel week-over-week decline in supply is nothing to sneeze at. In addition, last night’s API stocks report showed a -8.322 million barrel draw, down from a 2.000 million barrel build last week.

As one would expect with lagging supplies, August WTI futures are on the bull north of $41.00. It’s important to note that the August/September rollover in WTI futures contracts is on the way very shortly. August is holding on to a 3/2 volume edge, but the action is likely to switch to the September issue by Friday. 

WTI Rallies On EIA’s 7.493 Million Barrel Draw On Supply

For the better part of the summer, August WTI has rotated within last March’s GAP area of $42.17-$38.98. Although a bullish bias continues to be warranted, one has to wonder if this market is ever going to break out.

August WTI Crude Oil Futures (CL), Weekly Chart

Here are the key levels for August WTI going into late-week trade:

  • Resistance(1): Top of GAP, $42.17
  • Support(1): Bollinger MP, $38.69

Bottom Line: While the ranges remain tight for August WTI, there are many reasons to maintain a bullish bias. The largest factor is summer seasonality and decreasing barrels on hand. At this point, buying dips isn’t a bad strategy for WTI.

For the rest of the week, I’ll have buy orders queued up from $38.76. With an initial stop loss at $38.44, this trade produces 32 ticks on a standard 1:1 risk vs reward ratio.

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