Summary:

  • DOE inventories: -4.6M vs +1.4M exp
  • Print not too different to last night’s API
  • Oil pares earlier losses in immediate reaction

The weekly DOE inventories have shown a large decline of 4.6M barrels according to the latest data, which was well below the consensus forecast for +1.4M. What is more the decline is only the 2nd drop in the last 6 prints and the largest decrease since January. Unsurprisingly the initial reaction to the drop was positive with Brent Oil surging higher by around 

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 Oil rallied around 80 points from the low to the high in the 30 mins following the DOE release. Source: xStation

However, upon further inspection the report may not have a lasting positive impact on the market. Looking more closely at the components the Cushing number was substantially higher (+3.7M vs +1.8M) whilst both Gasoline (-1.1M vs -1.5M) and Distillates (+0.5M vs -1.3M) also beat. Furthermore, the consensus forecast was taken from a survey earlier this week and often the API reading is a more accurate gauge as to what the market is really expecting. 

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 Oil sits at an interesting level around 67.50 and tonight’s closing level may prove pivotal going forward. Source: xStation

Looking at a D1 chart today’s close may be seen as key with 67.50 a potentially pivotal line in the sand. The market had broken below here earlier but has since rallied on the DOE draw and a failure to end the day above here could put the pressure back on. Should price end the day above here then it may be seen as a false break and the market may move back towards the $70 handle once more. The 8 and 21 period EMAs have also converged and this adds to the importance of this level as a possible inflection point.