Oil Prices Fall $2, Forming a Double Top After Failure at the 200 SMA
Oil prices were on a bullish trend for more than a week since reversing at $71.43 earlier this month after forming a doji candlestick which signaled the bullish reversal. Over this period, the price surged by more than 10%, to reach a high of $78.74 yesterday before the reversal came after Oil buyers failed at the 200 daily SMA for a second time.
Oil Chart Daily – The 200 SMA Rejected the Price Again
This upward movement indicated strong bullish momentum for the commodity and signaled a favorable shift in the technical bias. However, after reaching the 200 SMA (purple) on the daily chart, WTI Oil prices experienced a reversal, giving up their gains. This moving average acted as resistance in January and it did so again yesterday, indicating a double top.
The double-top chart pattern suggests a decline that will stretch twice as much as the distance from the bottom of the reversal to the top. This distance is around $7.50 so, the decline from the top around $79, should come at $64. However, there’s a long way until then and the price should push below $70 first.
Massive Buildup in EIA Crude Oil Inventories
The EIA inventories yesterday showed a massive increase yesterday, which was another reason for the decline. Crude inventory data for the last week showed a significant build of 12,018K barrels, well above the expected increase of 2,560K barrels. This marked a substantial rise from the previous reading of 5,521K barrels.
Gasoline inventories experienced a drawdown of 3,658K barrels, surpassing the anticipated decrease of 1,160K barrels. Distillates also saw a drawdown, albeit slightly smaller than expected, at 1,915K barrels compared to the forecasted decline of 1,600K barrels. Refinery utilization fell by 1.8%, contrasting with the expected increase of 2.6%.
Despite the large build in crude inventories, production remained unchanged at 13.3 million barrels per day (mbpd). Additionally, implied gasoline demand decreased to 8.17 mbpd from the previous reading of 8.81 mbpd. Private oil inventories from the previous day showed a build of 8,520K barrels for crude, while gasoline and distillates experienced drawdowns of 7,230K barrels and 4,016K barrels, respectively. Cushing inventories increased by 512K barrels.
US WTI Crude Oil Live Chart
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