Oil’s Dead Cat Bounce Ahead of Crude Inventories

Crude oil recouped some of its intra-session losses overnight, but the wolves are still circling.

Oil was whipsawed overnight, as both Brent and WTI fell over two percent in the New York trading session as news hit the wires that OPEC’s compliance level had dropped to 90%. Crude was saved by the bell, so to speak, by the API Crude Inventory numbers very late in the session. These showed an unexpectedly large drop in inventories of 4.2 million against an expected draw of 2.3 million barrels sending Brent and WTI up one percent.

Even with the late bounce in prices though, both Brent and WTI remain on their knees from a technical perspective. All attention may be on the FOMC this evening but for energy traders, far more important will be the official EIA Crude Inventories coming out 2.5 hours before the main event. The market is expecting a 3 million barrel draw down, and we can expect a decent move on a miss either way.

Brent spot trades at 50.50 in early Asia having broken and closed below its 200-day moving average at 50.95 overnight. Above here resistance is at 51.75. Support lies at 49.75 and then the March low at 49.50 close behind. A break here could see more stop loss selling.

WTI spot trades at 47.75 in Asia with two closes under its 200-day moving average now at 48.75. Behind this is a double top resistance at 49.00. Support lies at 47.10 and then the March low of 46.50. Like Brent, a break of the latter level could see another stampede for the exit.

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