Crude Oil Today - Inventories spike but prices were already lower

Market Analysis /
Greg McKenna / 01 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 was lower. It’s a classic fit the narrative to the move. Because even though the Trump entreaty was out this time yesterday, his offering to meet the Iranians is being blamed for the fall. Forget about Rouhani’s repudiation of the offer. And then we've had folks fit the big 5.6 million build in API as the culprit.

Anyway, WTI is down 2.4% to $68.44 and Brent is off 2% to $74.24. That could be it folks - see chart below.


You know how I always talk about fitting the narrative to the price action? Check out this chart. The API inventory data came out around 6.30 my time and did show a big build of 5.6 million barrels. But the WTI had already lost 1.9%. Yet one of the best, most influential, and well-respected economists on the planet made a rookie mistake in this tweet.

I’m not popping MEE, just using it to highlight that we all make the mistake of ex-poste rationalisation.

Source: Twitter Screenshot
Source: Twitter Screenshot

Equally though everything else I’ve read blames President Trump’s offer to talk to the Iranians yet doesn’t mention the Iranians saying no thanks, get out. Maybe it was Trump because that’s what traders seem to have told each other. But it was one heck of a delayed reaction given I wrote about it yesterday morning.

For importantly though, in terms of Brent in particular, is that we've now seen an almost perfect rejection of the old 1 year uptrend channel bottom overnight. That's good for the shorts because we've seen a break, we've seen price retest the trendline (granted we've had a contract change) and now a rejection.

Has Brent seen the end of the second wave and is now poijted lower again? Here's the chart.

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


API this morning showed a big build. So all eyes will be on the EIA data this evening. That's both in aggregate and with regard to Cushing in particular. 

On the day today we get New Zealand employment and labour costs this morning and then it being the start of the month we get the raft of manufacturing PMI’s across the globe. Here in Australia we get the AiGroup’s version. Also, out is an RBI decision on interest rates. Tonight, it’s the ISM in the US I’ll be watching closely along with where Europe is at and then tomorrow morning at 4am my time the Fed will do nothing the market is betting. 

Have a great day's trading.

Greg McKenna

Chief Market Strategist

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