Oil prices rose by just over one percent overnight as the Energy Information Administration (EIA) Crude Inventories showed a drop of 3.3 million barrels, continuing the trend of declines of crude oil in storage in the U.S. Although the number was slightly less than predicted, crude also got a boost from continued supply disruptions in Libya as well as potential weather related disruptions in the Gulf of Mexico.
The street appears to be in a wait and said mode now, firstly from Yellen’s keynote speech at Jackson Hole, and secondly for more substantial evidence of OPEC compliance and a tightening of supplies globally rather than just the United States. The market seems unwilling to pull the trigger and test higher ranges on either Brent or WTI until this happens, even as the short end of the Brent futures curve moves into backwardation.
Brent spot is trading flat at 42.65, just below its upper range boundary at 52.70. A break opens up a test of 53.50 as Brent’s price action and premium over WTI spot continues to be the more constructive of the two. Only a move below 51.20 would shake confidence at this stage.
WTI spot is also flat from its New York close at 48.20. The short term technical show a converging triangle with lower and upper boundaries at 47.65 (also the 100-day average) and 48.50. A break of either level opens an extension of the price action below 47.00 and above 49.00 respectively.