Summary:

• DOE inventories -6.0M vs -0.5M exp and -1.8M prior
• Brent Oil spikes higher following the release and recaptures $56
• Longer term there are signs the uptrend is under threat

The weekly DOE inventories have shown their largest decline in 7 with a drop of 6m barrels far greater than the 0.5M decline that was expected. After a run of three weekly builds following the damage caused to refineries by hurricanes, today’s release is the second decline in a row and could signal the end to the increases seen in September..

 The annual trajectory of Oil inventories remains at its lowest in several years. Source: XTB Macrobond 

We can observe the rebound in oil production of late after the sharp declines seen during the past month when the hurricanes had damaged refineries. There was a rapid drop in oil production recently but this has recovered by and large and remains in a fairly well-defined uptrend. 

 Oil production has rebounded after dropping sharply last month. Source: XTB Macrobond

After surging higher on the first session of last week there has been a prolonged decline in Brent oil with the market closing each day lower for the past 6 days. The rise seen following the DOE release has seen the current candle turn green and the bounce comes from a potentially significant support level. 55.60 has previously acted as something of a swing level and the 21 period EMA is also currently in this region. Should price hold above here then a move back towards the 2017 peak at 58.86 may occur but should we get a break lower then a decline to 53.00 may lie ahead. 

 Brent Oil is threatening to end the uptrend seen since June with 55.60 now potentially key support. Source: xStation