Home / Blog / Market Analysis / Crude Oil Today - Inventories, a couple of trend lines, and Saudi production combine for a big dip

Crude Oil Today - Inventories, a couple of trend lines, and Saudi production combine for a big dip

Market Analysis /
Greg McKenna / 02 Aug 2018

Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices. 

As ever, feedback welcome


Oil joined the commodity funk overnight and is sharply lower this morning as a combination of a big increase in Saudi production and then a build in US Crude inventories (+3.8m v -2.79m exp) knocked prices lower. Distillate’s build was much bigger than expected though gasoline showed a bigger than expected draw.

So WTI is now down 1.32% $67.80 while Brent is down 2.35% at $72.39 (love those techs). 


I just love technicals. 

While everyone else was making up the reasons for the move yesterday the charts suggested – for Brent at least – that the break of the big trendline had been retested and rejected. That pointed things lower and I sold a little Brent yesterday on the break of the previous night’s low.

It was opportunistic and I’m out now, but the move may have a little further to go yet.

So, explaining last night’s moves in oil is pretty straightforward I think. 

A technical rejection and then a big miss on US crude inventories, plus the fact that there were reports Saudi oil production was up near a record.  My sense is looking at the charts both Brent and WTI can fall another $1-1.50 before they run into significant support.

If those levels break though….watch out below. Here’s Brent again.  

Click on me, I'll expand
Click on me, I'll expand

The bigger question is of course where to next for oil after that $1-1.50 fall. 

For me, I'm just following the charts and both $71.00/50 (in Brent terms) and $65.50/66.00 in WTI are huge levels to respect but also to be wary of. I say that because if these prices were to break we could see a deeper retracement. 

Here's weekly WTI as an example of where important support is and where things might head should they break. But, a word of caution. Regular readers know the McKenna Mantra which is that I always respect levels and trendlines UNLESS or UNTIL they break. 

That's particularly the case given I haven't even mentioned Iran or the Middle East this morning - though Saudi production lift will go some way to assuage fears. 

Click on me, I'll expand
Click on me, I'll expand


On the day we get trade in Australia with the market expecting a $900 million surplus.

Euro area PPI is out tonight but everything pales into insignificance when compared to the BoE meeting decision. The market expects rates to be lifted 0.25% to 0.75%. But there will be much poring over the statement, minutes, and Mark Carney’s press conference.  

US factory orders and ISM manufacturing will be interesting later in the night.

Have a great day's trading.

Greg McKenna

Chief Market Strategist


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