The American Petroleum Institute (API) rode to oil’s rescue overnight reporting a massive 9.2 million barrel drawdown in inventories against an expected 3.6 million barrels. Ahead of this number both Brent and WTI had been under heavy selling pressure from stale long positioning against a backdrop of falling China demand and increased OPEC and U.S. shale production.
Both contracts rallied some two percent off their lows to close up around 0.50% on the day. The technical picture, however, differs slightly with WTI, in particular, most certainly not out of the woods.
Most notable is that the rally in WTI spot failed at its 100-day moving average at 47.85 with the contract limping along in early Asia just below at 47.65. A failure to regain this level today could imply more short-term pain ahead with the next meaningful support at 47.00 and then 46.20.
Brent spot painted a slightly rosier picture, breaking its 100-day moving average at 50.50 but rallying back to close comfortably above it at 50.90 in early Asia. Brent has nearby resistance at 51.00 with a double bottom at 49.90 now must hold support.
All eyes will now turn to tonight’s official U.S. Crude Inventory report with the street hoping that it too follows the API figures and reports a significant drawdown. This would take the pressure of crude in the short term with a disappointing number seeing longs heading for the exit door en masse.