Who Will Take Control in Oil Market? #2
Although the EIA weekly report showed that crude oil inventories dropped for a ninth straight week and distillate stockpiles fell more than expected, U.S. production outweighed positive news. But did yesterday price action change anything in the technical picture of black gold?
Yesterday’s report showed that crude inventories dropped by 6.9 million barrels easily beating expectations for a decrease of 3.5 million barrels. This significant decline was mainly led by a record drawdown of 4.2 million barrels at the U.S. storage hub in Cushing, Oklahoma. What’s interesting, it was the largest weekly draw since 2004. Despite this bullish fact and a decline in distillate stockpiles, U.S. crude oil production rose 258,000 barrels per day to 9.75 million bpd last week, which means that the barrier of 10 million bpd could be broke quite easily in the coming week.
This also suggests that we may see short-lived moves in both directions before the release of another government report as investors may want to wait for a significant fundamental factor that would sink the price of black gold before opening big short positions.
Nevertheless, such a pro-bearish signal that could trigger a move to the downside may also be today's Baker Hughes report. If it shows a bigger increase in the number of oil rigs, oil bears will likely react before today’s market closure or on Monday – similarly to what we saw in the past.
Before we see how the number of oil rigs changed in the recent week, let's check how yesterday's price action influenced the technical picture of crude oil.
Crude Oil’s Technical Picture
The long-term hasn’t changed much since our Wednesday alert was posted, therefore, if you haven’t had the chance to read about the broader perspective, we encourage you to do so today. Today, just like yesterday, we’ll focus on the daily chart (charts courtesy of http://stockcharts.com).
From today’s point of view, we clearly see that the overall situation in the very short term also hasn’t changed much, because crude oil wavered the second day in a row, which resulted in another doji candle. Taking this fact into account, we believe that what we wrote yesterday remains up-to-date also today: