U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled sharply lower on Wednesday, posting a potentially bearish technical signal in the process. The catalysts behind the selling pressure were profit-taking and position-squaring ahead of Thursday’s U.S. Energy Information Administration’s (EIA) weekly inventories report, increased production by OPEC and a report that claimed Russian was not interested in making anymore production cuts.
August WTI crude oil futures settled at $45.13, down $1.94 or -4.12% and September Brent crude oil finished the session at $47.79, down $1.89 or -3.80%.
On Wednesday, data from Thomson Reuters Oil Research showed OPEC’s exports rose in June. The report went on to say that OPEC exported 25.92 million barrels per day in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier.
According to data from tanking tracking firm Clipper Data, shipments from top oil exporter Saudi Arabia and other OPEC members were on the rise in June.
In other news, Saudi Arabian state oil giant Saudi Aramco said it would cut prices for light crude grades to customers in Asia in August, a sign of rising competition in the key demand area.
Finally, another report said that Russia has ruled out deeper production cuts.
Forecast
Crude oil prices are getting a slight boost early Thursday in reaction to a report from the American Petroleum Institute (API) that showed a bigger-than-expected draw from inventory.
According to the API, inventories fell by 5.764 million barrels the week-ended June 30. Analysts were looking for a read of 2.83 million barrels.
Gasoline inventories also showed a draw during the same time period. Inventories fell by 5.7 million barrels. Analysts were expecting a 500,000 barrel draw.
There wasn’t much reaction to the API news which means investors are waiting for the EIA’s weekly inventories report, due to be released at 1500 GMT on Thursday. It is expected to show a draw of 2.4 million barrels.
Investors will be particularly interested in U.S. daily production since a drop in this figure the previous week underpinned the crude oil market during its recent 9 day rally. Another drop in daily production could trigger a short-covering rally.
Traders are going to have to determine if a drop in U.S. production outweighs the increase in OPEC production. If they feel that the U.S. data carries more weight, then crude oil will rally. If daily production rises then look for crude oil prices to retreat.
The key area to watch on the WTI chart is $44.69 to $44.06. Bullish investors may try to form a secondary higher bottom after a successful test of this zone. Bearish investors are going to try to take out this zone in an effort to make $47.32 a new secondary lower top.