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Earlier this afternoon the US Department of Energy released their latest inventory update for the week ending 21st July. This showed a 7.2 million drawdown in crude against an expected reduction of 3 million barrels. There were also larger than forecast drawdowns in gasoline stockpiles and at the Cushing, Oklahoma hub. The data confirmed last night’s update from the American Petroleum Institute (API). Both WTI and Brent soared after the API recorded a 10.2 million barrel drawdown in crude - miles more than the 3 million expected, and the biggest draw since September 2016. Crude made further gains following the release of today’s data. However, both WTI and Brent soon pulled back from their best levels.

Ahead of last night’s release WTI had pushed above key resistance around $47. This level marks the 50% retracement of the of the May-June sell-off which followed the last OPEC meeting in Vienna. Since then WTI has made further gains and was trading above the $48.50 area after today’s update. This level is also significant. Firstly, it marks the 50% retracement of the sell-off from the significant high hit back in February this year to the June low. Secondly, this coincides with the upper end of a trend line which marks a line of resistance in a downward-sloping channel that began forming in March. 

If WTI can break above and then consolidate above $48.20/$48.50 for the rest of this week then it will look as if the bulls are back in control and further gains look possible. Both contracts have had a strong start to the week thanks in no small measure to commitments made in St Petersburg on Monday. Oil ministers from six key oil producers met in the Russian city and Saudi Arabia promised to cuts its exports by 1 million barrels per day (bpd) to 6.6 million bpd from August. In addition, the ministers pledged to extend the current 1.8 million bpd production cut for a second time, taking it out beyond March 2018 if necessary. Nigeria also agreed to cap output at 1.8 million bpd. It currently produces around 1.7 million bpd. 

WTI

Chart courtesy of Investing.com

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Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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