EIA Crude Oil Stocks Fall By 3.135 Million Barrels

It’s Wednesday and the EIA has released its weekly crude oil stocks report. Today’s figures are down big, coming in at -3.135 million barrels. If you remember, last week brought an EIA supply build of 15.189 million barrels ― this morning’s numbers paint a much different picture.

On the pricing front, January WTI crude oil is bullish and on the doorstep of $48.00. However, it’s important to remember that rollover from the January to February WTI contract is underway. Volumes are currently slightly above 50/50 in favor of January. Subsequently, it’s a good idea to anticipate the February contract to be the new front-month issue by tomorrow.

Below is a quick look at this week’s crude oil supply figures:

Event                                                  Actual                    Projected            Previous

EIA Crude Oil Stocks                        -3.135M                   -3.500M              15.189M

API Crude Oil Stocks                         1.973M                        NA                    1.141M

Right now, a bullish bias is warranted for WTI crude oil. In fact, I expect a test of $50.00 to unfold in relatively short order. Although $50.00 crude in December is a surprise, it isn’t all too uncommon. In fact, last year at this time, WTI was trading closer to $60.00.

Crude Oil Stocks Down, WTI Up

The technical picture for WTI crude oil is simple: the trend is up and $50.00 is in sight.

Here are the key levels facing this market for the immediate future:

• Resistance(1): Psyche Barrier, $50.00
• Resistance(2): 78% Yearly Range, $51.73

Bottom Line: Barring a major reversal, there should be a few WTI shorting opportunities coming our way by Christmas. The first of which may set up from just beneath the $50.00 handle.

Until elected, I’ll have sell orders queued up from $49.71 in February WTI crude futures. With an initial stop loss at $50.29, this trade produces 75 ticks on a slightly sub-1:2 risk vs reward ratio. Remember, this trade is for the February WTI contract, which will likely be the new front month beginning tomorrow.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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