Futures Commentary and Analysis

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Sentiments Change on the Oil Market. The EIA Report Brings Down the quotes.
Igor Afa - IF - Thu Apr 20, 9:26AM CDT

Yesterday's EIA report caused a significant pressure on the oil quotes. The WTI (#CL) crude oil fell by more than 3.5% after the publication of the statistics. This is the strongest price collapse for the last 6 weeks.


Let's take a closer look at the EIA report:

- oil reserves: -1.034 million barrels;

- gasoline reserves: +1.542 million barrels;

- consumption has increased; the functioning capacity of oil plants became 92.9% against 91.0%;

- the volume of oil production: 9.252 million barrels per day (+17 thousand).


Oil reserves have declined. Nevertheless, their fall was less than 29.6% as the forecasts said. We can also see an increase in gasoline stocks. In 2016, there was a similar situation when the increase of the supply for gasoline reduced the activity of refinery plants. This caused a reduction of the volume of oil refining. So, oil reserves have increased, that caused a negative dynamics on the “black gold” market. I’d also like to note that the volume of oil production in the US continues growing and has reached its highs since August 2015.


Let’s look at the current technical pattern


Support levels: 49.00 USD, 47.50 USD

Resistance levels: 51.85 USD, 53.50 USD


The #CL quotes kept the 47.00-47.50 USD key demand zone at the end of March. There was a sharp upward trend on the market. Oil has added to the price more than 12% during this period. But after yesterday's fall of the oil price, sentiments on the “black gold” market changed to “bearish” ones. The price has overcame and fixed below the 51.85 USD level which is already a “mirror” resistance. The key support level is 49.00 USD. Indicators also show the seller’s strength. The price is below the 50 MA and the 200 MA. The MACD histogram has reached the negative zone.

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The latest statements of the OPEC representatives can support the oil price in the nearest future. The organization is going to make a deal with the leading manufacturers that are not OPEC members in order to limit the volume of supplies to the world market. Conservative traders should wait for a correction to the 51.85 USD “mirror” resistance level. You can start selling oil after the price reaches this mark. We may expect its movement to 50.10-49.00 USD.


I also recommend opening short positions, if the price overcomes the 50.10 USD local support level. 49.00 USD is the goal for taking profit. In the medium term, the WTI oil can reach 47.00 USD per barrel. I advice to use a trailing stop for these trades.


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