Crude Oil Falls $4 Below $70 As EIA Inventories Build Up
Crude Oil fell below $70 yesterday after failing at the 50 daily SMA, as US EIA inventories showed another increase
Crude Oil has been on a bearish trend for two years, making lower highs, with moving average acting as resistance on the daily chart during retraces higher. Earlier this week, US WTI crude was retracing higher, climbing above $72, but the 50 SMA (yellow) acted as resistance in the daily chart and yesterday we saw a reversal lower.
WTI crude oil experienced a significant drop of $3.02, settling at $69.51, as the oil market reacted to concerns about a potential recession. This time, the market was influenced by expectations of central bank interest rate hikes, combined with mixed inventory reports from the United States.
The selling pressure in oil began shortly after the opening of oil futures for the day, as the American Petroleum Institute (API) data showed builds in petroleum products. The official data from the Energy Information Administration (EIA) was slightly better, but it failed to reverse the downward momentum. Following the release of the EIA data, bullish traders gave up, leading to an additional $1 decline in Oil prices.
WTI Oil Daily Chart – The 50 SMA Acting As Resistance Now
The bearish momentum continues in crude Oil
We are currently in the peak two months of the US driving season, and those who support higher oil prices will be eagerly looking for stronger signs of demand. In July, Saudi Arabia plans to cut production by an additional 1 million barrels per day, and sales from the US Strategic Petroleum Reserve (SPR) will come to an end. These factors should tilt the market towards tighter supply-demand balances. However, much of this expectation is already reflected in the market, so it would require a significant surprise to lift oil prices above the $65 floor.
US EIA Crude Inventories for the Week Ending 16 June
- US oil inventories -3831K vs +329K expected
- Prior was +7919K
- Gasoline +479K vs +113K exp
- Distillates +433K vs +705K exp
- SPR release 1.7 million barrels.
API data released late yesterday has weighed on oil prices today:
- Crude +1246K
- Gasoline +2935K
- Distillates +301K
The latest EIA numbers are certainly better than API but there has been little initial reaction.
US WTI Crude Oil
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