Crude Oil Jumps Above $46 On Unexpected Inventory Drop

WTI Crude oil extended gains for a second day as a surprise drawdown in inventory sends Oil higher, closing at $46.35 on Wednesday, 11^th May 2016.

A surprise drawdown in the weekly US crude oil inventory report released by the EIA yesterday sent WTI Crude oil prices to fresh 2016 highs. Oil prices closed yesterday at $45.99 after the weekly inventory report by the US Energy Information Administration showed that the weekly inventories fell 3.4 million barrels for the week ending May 6, reversing the previous week’s 2.8 million barrels in the build-up. Analysts were expecting to see a 0.1 million build up in oil inventories. The EIA’s report was in sharp contrast to the American Petroleum Institute’s weekly inventory report which showed that for the same period, US crude oil inventories rose 3.45 million reaching a high of 543.1 million barrels for the week reported. This report beat expectations of a 714k build up instead.

Weekly Inventory Report – API (+3.45Mn) For May 6, 2016

Weekly Inventory Report – EIA (-3.4Mn) For May 6, 2016

Oil prices remained volatile for the most of the week with a lot of factors contributing to the volatile.

Saudi Arabia replaced oil minister Ali al-Naimi who was in the position for nearly two decades with Mr. Falih, Chairman of Saudi Aramco

Wildfires in Alberta, Canada disrupted productions at the Oil Sands supporting oil prices

Iran production continued to increase by nearly 484k barrels per day

Saudi Aramco is expected to increase production over the coming weeks adding more than 1 million barrels a day

Crude Oil Technical Outlook

The weekly chart for Crude Oil shows prices struggling to break above the $45 handle on the weekly chart. Failure to post a convincing break above this level could spell downside risks with the price action continuing to show the hidden divergence. The support/resistance failure at 44.5 – 44 on the weekly chart could mean that Oil prices could eventually correct to 38.25 initially to find support.