Selling Crude Oil As It Fails to Rally on Major EIA Inventories Drawdown
Crude Oil was enjoying some buying momentum from early July until the middle of August, as Saudis were pulling all strings to raise the prices, when it started to reverse down. Since then Oil prices have faced continued struggles, extending a pattern of consistent declines that have been ongoing since the middle of this month. The energy market is currently marked by concerns about demand, particularly in China and the United States, although these concerns stem from vastly different reasons.
The more significant challenge comes from China, where increasing evidence suggests that the country’s recovery after three years of lockdowns has vanished. Furthermore, the monetary response by Chinese authorities to the recent string of weak economic data has failed to inspire confidence in financial markets as the real estate sector is facing major difficulties. Investors are hoping for a much stronger approach to counter the threat of potential deflation taking hold. However, the actions taken by the PBoC last week, which involved only a slight reduction in short-term loan rates, have been deemed insufficient according to market sentiment. The general consensus appears to be that while it’s a step in the right direction, it falls far short of what’s needed to address the situation adequately.
The US economy has been doing well, but the signs of economic stagnation are increasing, as services posted another slowdown, while manufacturing PMI fell deeper in contraction this month. The EIA inventories showed another major decline yesterday, but the reaction in crude Oil was very small. WTI crude almost climbed $2 yesterday but that came after the softer manufacturing and services PMI figures, while the EIA report was brushed off. As a result, we decided to open a sell Oil signal after several doji candlesticks on the H1 chart, which point to a bearish reversal.
US EIA Weekly Oil Inventories
- EIA weekly oil inventories -6,135K barrels vs -2,850K expected
- Prior was -5,960K
- Gasoline +1,467K vs -888K expected
- Distillates +945K vs +218K expected
- Refinery utilization -0.2% vs +0.4% expected
API data late yesterday showed:
- Crude -2,418K
- Gasoline +1,898K
- Distillates -153K
US WTI Crude Oil Live Chart
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