Crude Oil Drop Reason for Over Supply

crude oil

24-05-2018 11:02 AM

Crude oil prices settled lower on Wednesday and continue to trade lower on Thursday morning with the data showing a surprising jump in U.S. crude supplies.

According to data from the Energy Information Administration (EIA) - Inventories of U.S. crude rose by 5.778 million barrels for the week ended May 18, confounding expectations for a draw of 1.567 million barrels.

Crude imports rose 558,000 barrels per day (bpd) last week to 8.159 million bpd, while Experts fell 818,000 bpd to 1.748 million bpd.

Gasoline inventories rose by 1.883 million barrels, missing expectations for a fall of 1.388 million barrels, while supplies of distillates fell by 0.951 million barrels, missing expectations for a draw of 1.335 million barrels.

U.S. oil output remained elevated, at just more than 10.7 million barrels a day, according to preliminary EIA data.

Technical chart

crude oil

Technical outlook

The crude oil daily chart has formed “Rising wedge” pattern. In this pattern, prices are holding currently nearby support which is 4875($71.30). A break and close of a daily candle below the level should send prices to downside target 4850-4800($71.90-70). The right strategy in this scenario would be sell on rise around 4935($72.20). The target expected is at 4900-4885($71.65-71.45) because RSI shows overbought condition which will reduce the heat.