After last week’s failure to break higher in Brent and WTI, which showed a clear bearish signal on the weekly chart, both crudes declined sharply at the beginning of this week.
Brent declined all the way to $50 while WTI Crude managed to touch 47 during yesterday’s trading. However, both Brent and Crude recovered some of their last week’s declines. Yet, both are still trading within a tight range.
ADPI Data Saved The Day
Yesterday, both crudes were declining and touching new lows, especially Brent, which was very close to breakthrough the $50 psychological support. API Crude Oil Inventory data came out, leading to a clear U-turn and both crudes closed the day slightly higher, after declining by more than 1%.
The API Data showed a notable decline in inventories, declining by more than 9.2M barrels last week, despite the fact that the estimates were to decline by 500K only. This is the biggest weekly decline in API inventory since September of last year.
Yet, the crude reaction is still weak, and if you look at the charts, you can see that the momentum is not there yet, which keeps bearish outlook unchanged.
EIA Data Is Key Today
During the US Session today, eyes will be on the EIA Crude Oil Inventory, especially after the huge decline in API Data, which has been more accurate than EIA recently.
The estimates point to a decline of -3.2M barrels last week, compared to -6.5M barrels the week before. If the estimates are right, Crude Oil inventories would be declining for seven weeks in a row, which would be the second longest declining stake since the beginning of this year.
Traders need to be very careful, as the rally we saw yesterday might be a pricing in of today’s surprise by the EIA. Therefore, any number below 5M barrels from EIA today would lead both crudes to tumble back and likely to lose yesterday’s gains.
OPEC On Radio Silence
For the past few days, we haven’t noticed any new comments by OPEC or Non-OPEC producers, despite the fact that Brent touched the $50 mark.
However, this doesn’t mean that the producers are happy with the current prices, but they are “ok” to see some fluctuations, as long as it stays above that support.
Expect OPEC to return to the media once again, once they see a slight breakthrough that support, just like what happened recently, when they decided to announce some new measures to cap Oil exports from some of the producers including Saudi Arabia.
Brent $50 Remains Solid
As mentioned earlier, Brent touched the $50 and bounced once again. However, looking at the chart above, Brent has been trading within a tight range for almost two weeks.
Tuesday and Yesterday’s decline broke that tight range, turning the 51.30’s to a new resistance area. Brent tried to break above that resistance earlier this morning, but without any chance, therefore, the downside outlook is likely to remain in play.
Meanwhile, a breakthrough the $50 is what matters, as if it happened, the first immediate support stands at 49.50 followed by 48.50.
The downside outlook invalidation scenario is Brent breaking above the 53.0, which remained solid for the past two weeks.
On a longer-term view, as long as Brent continues to trade below the 55, which failed multiple times this year, the downside pressure is here to stay until further notice.