Yesterday, the US Energy Information Administration released weekly data on crude oil inventories. As a reminder, last week’s inventories were in the negative zone, at -2.19 million barrels. This week’s forecast expectations were for an increase in inventories of 0.8 million barrels, in fact they totalled 5.474 million, i.e. almost seven times higher than forecast.
Refineries processed 0.329 million barrels of crude, up from 0.165 million. US oil imports totalled 0.913 million barrels, well above the previous week’s imports.
Gasoline inventories also rose to 0.878 million barrels from the previous -2.2m.
US consumption data is now the key for the global oil market as China is not having a significant impact on it due to slowing economic growth and its domestic demand falling.
For the bigger picture, investors should focus on today’s release of the US Manufacturing PMI. If the index comes in lower than forecast, it will be another card in the oil bears’ deck.
The increase in inventories and domestic refining in the US puts downward pressure on prices, including Brent, but as past data shows, this effect usually has a time lag. Moreover, from a technical point of view, Brent still has an untested local low at 77.15, formed on 15 October. This level is a potential target for Brent prices and if it is reached, it is advisable to go short.
The overall recommendation is to sell Brent oil from the level of 77.15.
Profit could be taken at 79.00. A stop loss could be set at 78.00.
The volume of the opened position should be set so that the value of a possible loss, defined with a protective stop order, does not exceed 2% of your deposit.
