Oil’s stately progress higher dented by inventory build

Since the start of the year, the progress for oil could best be described as stately, and over the last few days, we once again see this price pattern develop, whereby we see a minor rally, then followed by a pause and congestion, before the next minor rally develops.

The key level of the last few weeks has been the well-developed price resistance at $57.50 which was breached earlier in the month, and since then the price of oil has continued to meander higher to test the $60 per barrel level and which is now building into a further region of resistance. The forecast this week was for an inventory draw of -1.1mbls well below last week’s surprise number which saw a very large draw of -9.6mbls against the forecast of a build. However, in contrast, this week we have seen the opposite, with a draw forecast and the actual delivering a build of 2.8m bls. This was enough to drive the price of oil lower, and this short term bearish sentiment has now followed through in early trading today, with the price of oil trading at $58.54 per barrel at the time of writing. From a technical perspective, we do have a strong level of potential support in the $57.80 per barrel area as denoted with the red dashed line of the accumulation and distribution indicator, which may provide the platform for a recovery and test of the $60 per barrel price point in due course.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading