• DOE inventories: +3.8M vs -2.6M expected
  • OPEC production rises by 300k bpd in July
  • Oil remains lower on the day after outside bearish signal yesterday

The weekly inventory data from the US has offered little support for crude bulls, with oil remaining under pressure after a large outside day on Tuesday. The DOE crude oil inventories showed a build of 3.8M, marking a marked increase from the -6.1M last time out. The consensus forecast of -2.6M also called for another drawdown, but the immediate reaction has been a bit mixed – possibly because the build was smaller than last night’s API print of +5.6M.

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 Oil initially rose from near its lowest levels of the day on the inventory release, but the market has subsequently come back under pressure and made a new low at 72.31. Source: xStation

Looking at the components more closely the gasoline did show a sizable drop, while a decrease in US production could also be seen as positive for the price of crude. The most noteworthy are as follows in the format of actual vs expected unless otherwise stated:

  • Gasoline: -2.5M vs -2.0M 
  • Distillates: +3.0M vs +0.5M
  • Production: 10.9M bpd vs 11.0 M bpd prior

More bad news for longs came from the latest OPEC report, with the groups production shown to have increased of late. For July the group’s output rose by 300k bpd to 32.6M bpd with traders and analysts now closely watching the situation in Iran. With sanctions on Iran expected to come into effect imminently there are some concerns that the fall in production wont be offset by other members of the organisation – namely Saudi Arabia. 

The longer term picture for Oil turned more negative yesterday when a bearish engulfing candle marked a reversal to the latest move higher. Price has been making a steady push higher and recouping some of the losses seen at the end of last month, but now it looks like we could be inf or another retest of the 71.25 level. This could now be seen to be key support with a break below there opening up the possibility of a larger decline towards 66.90 and maybe even 61.80. 

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 Oil has broken below a recent rising trendline and may now be set for another push lower. Source: xStation