WTI rebound falls short of Tuesday's high - technical analysis
Oil is a violent market and the price action today is yet another example. Crude prices hit a two week low of $48.45 immediately after inventory data hit but a $2 squeeze followed afterwards.
Part of the reason for the rally were comments from Saudi Arabian oil minister Ali Al-Naimi who said oil demand is growing and that the market has turned 'calm'. The oil stockpile data was also foreshadowed by a jump in supplies in the API data so it shouldn't have come as a surprise. That said, gasoline and distillate supplies are a bit tighter so that may add a bid into the market.
Overall, the technical picture is the decisive factor for me. This squeeze looks like a short-term play to me and the market has been unable to rally on bullish news like the talk of an emergency OPEC meeting on Monday.
A few reasons I favor the downside:
- Earlier in the week, crude broke the uptrend and series of higher highs on the daily chart.
- The triple top on the daily chart
The risk is that prices close above yesterday's high (currently at $50.42) and that threatens a bullish outside day.
Ultimately, global supply continues to rise and I just haven't seen enough pain among oil producers to imagine that supply is going to turn lower. On the demand side, the Saudi's are touting growth but there is really nothing to back that up. The global economy is mediocre and people aren't suddenly driving much more just because gas prices are a tad lower.
