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Crude oil futures recovered some of the loses, but bears remains on the market

Crude oil futures recovered some of the loses from the previous day, rising by 3.1% to 47.66 USD per barrel.

Crude oil futures

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Crude oil futures recovered some of the loses from the previous day, buoyed by a third straight weekly decline in US crude supplies and a sharp decline in distillate stocks, after a price plunge a day earlier pushed the US benchmark down to its lowest finish in nearly 16 months.

The WTI oil futures with January delivery is up by 1.42 USD, or 3.1%, at 47.66 USD per barrel on the New York Mercantile Exchange. The contract settled at 46.24 USD per barrel on Tuesday, the lowest finish for a front-month contract since August 30, 2017, according to Dow Jones Market Data. The January futures contract expires at the day’s settlement. The WTI crude oil futures with February delivery, which will become the front-month contract, traded at 48.08 USD, up by 1.48 USD, or 3.2%.

Amid plunging oil prices pressured by the double weight of the US production and global economic growth projections, the Energy Information Administration reported a crude oil inventory draw of 500,000 barrels for the week to December 14, after a weekly draw of 1.2 million barrels a week earlier.

The EIA report comes a day after the American Petroleum Institute served one of its now regular surprises by reporting a build in inventories of 3.45 million barrels, which pressured prices further below 50 USD per barrel for WTI and 60 USD per barrel for Brent crude.

Oil production and US stockpiles

The Energy Information Administration reported Wednesday that domestic crude supplies fell by 500,000 barrels for the week ended December 14. Analysts polled by S&P Global Platts expected a larger decline of 3 million barrels in crude supplies, but the American Petroleum Institute on Tuesday reported a climb of 3.5 million barrels.

Refineries processed an average of 17.4 million barrels of crude oil daily last week, the EIA said, producing 10.3 million barrels per day of gasoline and 5.4 million barrels daily of distillate fuel. Gasoline inventories added 1.8 million barrels, while distillate inventories fell by 4.2 million barrels in the week to December 14.

Despite a more than 30% fall in benchmarks Brent and West Texas Intermediate in the past two months, today these recouped a fraction of their losses as the market seems to begin to calm down on better stock market performance.

Gasoline stockpiles rose by 1.8 million barrels last week, while distillate stockpiles, which include heating oil, dropped 4.2 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply increase of 2.6 million barrels for gasoline and a fall of 900,000 barrels for distillate inventories.

Oil price technical analysis

The WTI oil price consolidates above new 16-month low at 46.10 USD per barrel, posted on Tuesday after daily fall of 7.5%, while oil prices were down 12.6% in past three days and down 40% in steep fall which commenced in early October.

Renewed negative sentiment on fears that slowing global economy would depress demand and global oversupply, pushed oil price below the psychological level of 50 USD per barrel after bears failed in initial attack in late November and subsequent recovery attempts quickly ran out of steam.

WTI oil

The bears were boosted by strong build in US crude stocks. Focus turns towards today’s EIA report, which could add to negative sentiment if release disappoints.

The profit-taking and oversold conditions are the main factors that paused bears, but upticks could be seen as positioning ahead of the final push towards the target at 45.46 USD loss of which would open the way towards June 2017 trough at 42.04 USD per barrel and unmask psychological 40 USD per barrel support.

Former low at 49.40 USD and broken 50 USD pivot now mark solid resistances which are expected to cap, with falling 10SMA (50.47 USD) to limit extended upticks and keep bears intact.

The alternative scenario requires a break above 10SMA and nearby falling 20SMA (51.17 USD) to ease bear pressure, but break above December 5th recovery high at 54.54 USD is needed to sideline bears and signal stronger correction.