Originally published by AxiTrader
QUICK SUMMARY
Oil joined the commodity funk overnight and is sharply lower this morning as a combination of a big increase in Saudi production and then a build in US Crude inventories (+3.8m v -2.79m exp) knocked prices lower. Distillate’s build was much bigger than expected though gasoline showed a bigger than expected draw.
So WTI is now down 1.32% $67.80 while Brent is down 2.35% at $72.39 (love those techs).
BIGGER PICTURE
I just love technicals.
While everyone else was making up the reasons for the move yesterday the charts suggested – for Brent at least – that the break of the big trendline had been retested and rejected. That pointed things lower and I sold a little Brent yesterday on the break of the previous night’s low.
It was opportunistic and I’m out now, but the move may have a little further to go yet.
So, explaining last night’s moves in oil is pretty straightforward I think.
A technical rejection and then a big miss on US crude inventories, plus the fact that there were reports Saudi oil production was up near a record. My sense is looking at the charts both Brent and WTI can fall another $1-1.50 before they run into significant support.
If those levels break though….watch out below. Here’s Brent again.
The bigger question is of course where to next for oil after that $1-1.50 fall.
For me, I'm just following the charts and both $71.00/50 (in Brent terms) and $65.50/66.00 in WTI are huge levels to respect but also to be wary of. I say that because if these prices were to break we could see a deeper retracement.
Here's weekly WTI as an example of where important support is and where things might head should they break. But, a word of caution. Regular readers know the McKenna Mantra which is that I always respect levels and trendlines UNLESS or UNTIL they break.
That's particularly the case given I haven't even mentioned Iran or the Middle East this morning - though Saudi production lift will go some way to assuage fears.
DATA:
On the day we get trade in Australia with the market expecting a $900 million surplus.
Euro area PPI is out tonight but everything pales into insignificance when compared to the BoE meeting decision. The market expects rates to be lifted 0.25% to 0.75%. But there will be much poring over the statement, minutes, and Mark Carney’s press conference.
US factory orders and ISM manufacturing will be interesting later in the night.
Have a great day's trading.