The official U.S. Crude Inventories delivered last night, announcing a monster drawdown, but crude prices themselves did not. After a brief rally following the numbers, both Brent and WTI collapsed to finish 2% lower for the session at 50.20 and 46.75 in what can only be viewed as a worrying technical development.
Amongst the scramble by analysts to fit facts to the somewhat confusing price action, I can only conclude that there was still a lot of speculative long positioning in the market, that threw in the towel once Brent crude broke its 100-day moving average. The rapidly closing long term contango structure in the oil futures market is at odds with the movements lower in spot crude and most certainly cannot be explained by talk of OPEC noncompliance and peak oil demand, both of which are longer term indicators.
Brent spot is trading at 50.25 and has now broken and closed below its 100-day moving average at 50.50, joining WTI spot in the naughty corner after managing to maintain its good behaviour bond over Tuesday’s API Inventories. The next resistance sits at 51.10 with initial support at 49.70. A move through the latter is possibly signalling a deeper move lower to the 47.50 area.
WTI spot trades near its New York sitting at 46.80 with nearby support at 46.20 with a break suggesting more pain to the 45.20 area. After three consecutive daily closes below its 100-day moving average, this morning at 47.80, and its overnight high at 48.00, this level must break if WTI is to be deemed worthy of a good behaviour star.