Oil Attempting A Trend Reversal with EIA Helping Along

Crude Oil has been declining since October as shown on the H4 chart above, with moving averages acting as resistance during bullish reversals which were short-lived. However, since mid-December, WTI Oil has been making higher lows, which points to a bullish reversal, and particularly this week buyers have shown resilience, pushing higher whenever they got the chance.

The H4 chart is beginning to look good for Oil buyers, however, we cannot say that it has been easy for them, since the market has been very choppy, with everything that has been going on around the world in recent months, which affects Oil prices. US WTI Oil has gained more than $6 this month from the bottom which was below $70 in early January, with a lot of intraday whipsaws to trigger stop losses. Usually, seasonals for Oil are bullish in February, which means that we might see further bullish momentum next month, therefore if Oil breaks above the December high at $76.18, this might offer a buying opportunity.

Fundamentals Turning Positive for Oil

We have seen many headlines regarding the trouble in the Red Sea region which has helped Oil during this time, but all such moves have faded one after the other, which is not a positive sign. Besides that, OPEC members have shown that they have immense differences between them, which could lead to a breakdown of OPEC.

But, the comments from the Chinese central bank to cut the RRR by 50 bps would be a major stimulus of around 1 trillion Yuan. That is encouraging for Oil buyers, while the US economy continues to impress, after yesterday’s strong Services and Manufacturing PMI readings, which left contraction behind. Besides that, the change in the interest rate cycle from central banks from tightening to easing, benefits global Oil demand as well. Yesterday Oil got a boost from the EIA inventories, which showed a major drawdown, due to the cold weather in the US.

US Weekly Crude Oil Inventory from the EIA

• • Actual: -9233K (a decrease of 9,233,000 barrels)
  • Expected: -2150K
  • Previous: -2492K
• Gasoline Inventories:

• • Actual: +4913K (an increase of 4,913,000 barrels)
  • Expected: +2300K
• Distillates Inventories:
  • Actual: -1417K (a decrease of 1,417,000 barrels)
  • Expected: +348K
• Refinery Utilization:
  • Actual: -7.1%
  • Expected: -1.2%
• Production:
  • Production increased from 12.3 million barrels per day (mbpd) to 13.2 mbpd.
• Implied Motor Gasoline (Mogas) Demand:
  • Actual: 7.88 mbpd
  • Previous: 8.33 mbpd

API Data from Tuesday:

• Crude Oil: -6674K
• Gasoline:+7183K
• Distillates:-245K