Summary:

• Weekly DOE report shows drop of 2.7M (vs -1.9M exp) in US inventories
• Release contrasts last night’s API build of 3.1M
• Oil reacts negatively with Brent falling to its lowest level of the day

Despite a drop in the weekly DOE inventory report the price of Oil has come under pressure with Brent falling below the $56 handle to trade at its lowest level of the day. The drop in the headline reading of 2.7M was greater than the 1.9M expected but higher than the prior reading of -6.0M. Last night’s API showed a surprise build of 3.1M so against both the consensus forecast and the API today’s reading could be deemed as supportive of the oil price. 

However, the report on the whole wasn’t that positive for the market with both the distillate and gasoline readings offering cause for concern amongst longs. The distillate print of -1.5M was higher than both the consensus forecast (-1.9M )and the prior reading (-2.6M) and may be deemed negative for the oil price. Similarly the gasoline inventory rose far more than the expected +0.2M with a rise of 2.5M seen against a previous reading of 1.6M. 

 After spiking higher immediately after the release Brent Oil has since fallen to its lowest level of the day. Source: xStation

Overall the report could be described as mixed and as such the reaction in the market has been far from clear cut since the release. After already being lower on the day when the numbers hit, Brent Oil saw an initial spike higher before some more downside and the market fell below the $56 handle to its lowest level of the day. 

 Brent oil remains finely poised form a longer term perspective. Source: xStation

Longer term the market remains finely poised as price sits between the 8 and 21 period EMAs. In terms of levels to keep an eye on recent highs of 57.20 could act as resistance whilst a break below 54.90 would be a clear negative development and could lead to further downside ahead.