Wed, Apr



The consolidation pattern for January WTI crude oil futures between $52.00 and $50.00 continues for a third-straight session. Traded volumes are heavy, with over 425,000 contracts changing hands for January alone. In the wake of today’s positive EIA crude oil stocks report, energies players are taking a bearish stance towards global oil.

The Inventories Are In…

Every week at about this time, I take a minute and recap the hard data from the API and EIA oil inventories reports. Here is a quick look at this week’s numbers:

Event                                       Previous     Projected     Actual

API Crude Oil Stocks            -1.545M               NA           3.453M

EIA Crude Oil Stocks              4.851M           0.769M      3.577M

For the first time in recent memory, both the API and EIA reports are showing very similar figures. Each statistic has outperformed expectations. Industry analysts were expecting lagging oil stocks due to a spike in demand stemming from Thanksgiving holiday travel. This did not materialize but may prove relevant for next week’s report.

WTI Crude Oil Technicals

With oil supplies on the rise and a prevailing downtrend evident in January WTI crude, a test of $50.00 appears imminent.

Bottom Line: The pronounced “L” formation on the daily chart above indicates market compression and a pending breakout. WTI is definitively bearish, thus a directional move is likely to develop under $50.00.

However, initially, the $50.00 area is going to foster heavy two-way participation. Until elected, I will have buy orders queued up from $50.06. Using a tight initial stop at $49.93, this trade returns a fast 10 ticks on a sub-1:1 risk vs reward management plan.

Current Rates