crude oil

EIA Reports A Steep Oil Supply Draw

Posted Wednesday, August 26, 2020 by
Shain Vernier • 2 min read

It’s Wednesday and that means that the U.S. Energy Information Agency (EIA) has released its weekly oil inventory report. Today’s figures came in lower-than-expected, surprising most in the energy industry. At this point in the summer, demand for refined fuels typically begins to wind down. This was not the case last week as oil consumption rose almost threefold.

EIA Reports Steep Draw On Supplies

At press time (about 12:45 PM EST), October WTI crude oil futures are trading near flat. Prices are holding firmly above $43.25 amid slow market conditions. Here is a quick look at this week’s inventories statistics:

Event                                                    Actual                  Projected        Previous

API Crude Oil Stocks Report            -4.524M                      NA                -4.264M 

EIA Crude Oil Stocks Report            -4.689M                   -3.694M          -1.632M

This week has brought a consensus among the experts at the API and EIA. Supplies fell in the neighborhood of 4.5 million barrels last week, suggesting that consumption remains strong. With the Labor Day holiday coming up in a few weeks, today may be the last peak demand figure of 2020.

October WTI Holds The Line Above $43.00

For the time being, October WTI is in a logjam near $43.00. Prices aren’t in a hurry to go much of anywhere, trading in the vicinity of last March’s GAP area ($42.78-$39.00, not pictured).

October WTI Crude Oil Futures (CL), Weekly Chart

Here are the key levels to watch for the near future:

  • Resistance(1): 62% Fibonacci Retracement, $46.43
  • Support(1): Bollinger MP, $40.37

Bottom Line: With Hurricane Laura scheduled to make landfall later today, the future of WTI pricing is in limbo. If Laura turns out to be a rare Category 4 hurricane, then the damage to the Gulf Coast petroleum infrastructure will be severe. Under the Cat 4 scenario, October WTI may be poised for a late-week run at Fibonacci resistance.

Until elected, I’ll have sell orders in the queue from $46.24. With an initial stop loss at $47.26, this trade produces 125 pips on a 1 to 1 ¼ risk vs reward management plan.

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