WTI Crude oil was knocked down hard recently falling 7% last Thursday from $64.50 to $59.40, bouncing back slightly during the next couple of sessions after that, before getting smacked 4% yesterday to $57.36, as pandemic concerns and delayed vaccine rollouts weighed down on market sentiment. A buildup in API crude inventories coming in at 2.9 million barrels in the week of March 19 added to the bearish momentum. Traders were looking for a decline of about 300,000 barrels.

While a Suez Canal blockage is supporting higher prints today, this shut down of a top oil trade artery was not enough to push prices back above the key $60 mark. Moreover, we are still way below the $67.90 monthly highs. Meanwhile, the prompt time spread for global Brent crude has flipped to a bearish contango structure for the first time since January, in what appears to be a massive unwinding of long positions.

The Energy Information Administration (EIA) will publish its inventory numbers later today. OPEC and Russia have not opened the taps, but the U.S. and Canada have, and that could provide more pressure in coming weeks, especially with stockpiles already 6% above the five-year average.

Investors can’t really complain, with oil prices up more than 25% in the last three months alone. But a worse-than-expected buildup later today may trigger a panic run to the exit, as many long-term crude oil futures investors who so far have been patiently holding despite all the negatives, will choose to book their profits.

Crude Oil

The main trend is still up according to the daily chart. But a trade through the 50-day moving average today and a close below the lows at $57.25 will be seen as a bearish reversal signal. This is a potential trigger point for an acceleration to the downside, with the $57.30 support level as the next major downside target.

For a look at all of today’s economic events, check out our Economic Calendar

 

Rony Nehme

Rony Nehme

Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

 

 


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