Oil prices have recovered slightly in Europe but are far below the massive selloff levels from overnight, and the pain may not be over yet.
Oil prices tanked overnight with Brent falling 2.20% and WTI 2.60%; their biggest one day falls in over a month. Both contracts were wobbling yesterday as a lack of new drivers post the OPEC meeting saw the extended long positioning in the market get increasingly nervous.
The official U.S. Crude Inventory data delivered the coup de grace with the street ignoring the Keystone Pipeline shutdown-induced fall in crude stocks by 5.60 million barrels. Instead, traders concentrated on the gasoline inventories number which rose by a mammoth 6.80 million barrels against an expected rise of 2.55 million barrels. The knife was twisted as it was announced that U.S. crude production had risen to 9.70 million barrels a day.
Brent spot fell from 62.95 to 61.45 where it opened in Asia this morning. It carved through trendline support at 62.15 which now becomes resistance. More worryingly it is now just above the critical support at 61.25, a series of multi-day lows from early November. A break sets up a test of 60.00 with its multi-month support line just below at 59.30.
WTI had closed on its trendline support at 57.30 the previous day and never got to pass go, plunging to 55.80 before climbing an asthmatic 20 cent to 56.00 in Asia this morning. WTI’s next support is at 54.80 after which a chasm opens up on the charts until 52.50.
Oil long positioning faces a nervous end to the week as we head into U.S. payrolls data tomorrow.