Crude oil eases ahead of stockpiles data

Oil prices gave up their earlier gains yesterday and have since extended their declines. The American Petroleum Institute (API) reported disappointing oil inventories data last night ahead of official figures from the US Department of Energy today. Headline US oil inventories are expected to come in at +1.2 million barrels, but the potential for disappointment is there given the API’s estimate of +7.3m barrels. But even if prices fall, we think the downside could be limited.

The sharp recovery since the start of the year suggests investors have revised their views on the supply and demand forces impacting crude oil prices. Fears over a global economic slowdown have eased and this has helped to boost crude’s demand outlook, which looked bleak at the end of last year. This is because incoming data in the US has bucked the trend of disappointing macro numbers from Eurozone and China, while optimism over a US-China trade resolution has further brightened sentiment towards risk-sensitive assets across the board. On the supply side, although US shale production continues to rise, the OPEC+ production cuts and involuntary production outages are counterbalancing that.

In terms of technical analysis, below are some of our key thoughts:

Crude’s ongoing consolidation is not necessarily a bad thing as it allows momentum oscillators such as the Relative Strength Index (RSI) to continuing working off their ‘overbought’ conditions. It would be bullish if this is done through time as is the case now, rather than via a sell-off, which is also possible.
For crude to turn bearish, we will need to see a clear reversal pattern. On WTI, there is a potential “double top” pattern evident on the daily chart around $57.50. What’s more, we have seen a number of bearish-looking daily candles over the last couple of weeks or so.
However, the bulls have so far been resilient. The neckline of the above-mentioned double top pattern, at $55, is still holding while the bullish trend line connecting this year’s lows is also intact. What’s more, WTI is still holding in the sweet spot above the 21-day exponential moving average.

So, as things stand, crude oil is currently in consolidation mode after surging higher in the first two months of the year. There are, however, tentative technical signs to suggest a potential reversal in the bullish trend. But we haven’t seen the bearish trigger yet.

Source: TradingView and FOREX.com. Please note, this product is not available to US clients

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor