Oil falls on surprise weekly build up and comments from Saudi Aramco
The weekly Crude Oil inventories report released yesterday showed an increase in the stock piles of 2.63 million barrels against forecasts of 2.5 million barrels of increase. The increase in the stockpiles comes just a week after a surprise decline in the inventories report which sent Crude Oil surging during the week. On Wednesday, Crude Oil prices fell more than 3% as price touched back to the 11-year low on signs that Saudi Arabia would continue to keep production going, adding to the supply glut. WTI Crude oil finished yesterday’s session down $1.27 a barrel at $36.60. The bearish news for Crude Oil came about as earlier in the week Saudi ARAMCO’s Falih commented that Oil supply in the US was declining significantly and will continue to do so into 2016. He said that the company would continue to invest in Oil and Gas exploration despite the rock bottom prices and that the company’s production policy was to meet customer’s demand. He did add a slight hint of hope noting that Oil prices could balance out in 2016 and that prices are likely to recover. However, the continued supply glut overshadows almost every bullish view on the Oil markets and could keep prices subdued.
Crude Oil Technical Analysis
On the weekly chart, the doji pattern and the follow through with the bullish weekly close last week keeps the bias of a correction to the upside alive. Prices have been declining this week but as long as the doji’s low of 34.53 is not breached, Oil prices could see a medium term recovery on the horizon. Adding weight to this view is the fact that there is a median line failure which signals a potential move to the outer median line and a continuation could see prices breaking outside the median and the falling price channel as well. Resistance is identified at $44 – $43.40 region which is likely to be the first level of correction that could cap the rallies. The Stochastics oscillator on the weekly chart has also printed a higher lower against the price’s lower low indicating a short term shift. While Oil prices remain in a downtrend, the short term move to $44 – $43.40 could be seen as a potential correction ahead of a larger decline.
On the daily chart, the price action is quite evident as we notice a strong bearish decline near $37.75. The Stochastics has already printed a bullish divergence here with the lower low being confirmed by higher low on the oscillator. Expect Crude Oil prices to touch down to $35.85 – $35.90 region before the correction could kick in. From the weekly chart, the main resistance comes in at $44 – $43.40 while the daily chart will see prices struggling to break the short term resistance at $38.92 – $38.10, which has already see a brief reaction from the prices.
With the markets slowing down with New Years Eve in focus, the thin trading volume conditions could see some modest spikes in prices. However, as normalcy returns to the markets from next week, Crude Oil prices are likely to make it to the news, as long as the previous lows of $34.75 is not breached.
