Crude Inventories Expected to Surge – Is the Bullish Retrace in Oil Over?

Crude Oil failed to break above the 100 daily SMA and made a strong reversal after yesterday's API inventory buildup

Skerdian Meta•Wednesday, November 9, 2022•2 min read

Crude Oil has been bearish since March, falling below $80 in September, but since then buyers have been more active and they pushed the price above $90 a couple of times. The first rally in early October was due to the weakness in the USD, so that was not sustainable. The second rally had more reason behind it, as the sentiment improved broadly on a dovish tilt from central bankers after the last round of rate hikes in the last two weeks.

The FED still continues to be hawkish but they will pivot soon as well. Comments from officials in China of a possible reopening after three years of coronavirus restrictions helped the risk sentiment further. As a result, risk assets surged higher and Oil imports rose in China during October, but the details weren’t that impressive.

US Crude Oil Daily Chart – The 100 SMA Acting As Resistance

The retrace higher seems complete

WTI Crude Oil reached the 100 SMA yesterday which used to act as support and it rejected the price. The daily candlestick closed as an upside-down hammer which is a bearish reversing signal after the bullish move and the stochastic indicator was overbought as well. So, a perfect bearish reversing chart pattern formed and it seems like it is working out, as yesterday’s candlestick closed as a big bearish one.

The decline in Oil prices yesterday was also partly due to the news of worsening COVID outbreaks in China, hitting the demand outlook at the world’s largest Oil importer. But, the major hit came after the big release of the American Petroleum Institute (API) reported a large build this week for crude oil of 5.618 million barrels. So, crude Oil is heading down and the 50 daily SMA (yellow) will be the first test.

Expectations earlier centred on:

Headline crude +1.4 mn barrels
Distillates -0.9 mn bbls
Gasoline -1.1 mn

US WTI Crude Oil

WTI

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.