September crude oil continued its march to higher ground on Wednesday, August 17, as unexpected drawdowns in the EIA report surprise. The September contract tested support Wednesday morning as Saudi Arabia indicated it will produce record amounts of crude oil this month due to increased demand both domestically and from outside customers. Production could reach between 10.8 – 10.9 million bpd. The Saudis set an all-time record this past July, reaching 10.67 million bpd. Support held as the EIA report came out with a bullish outlook on inventory levels. Overall inventories declined by 2.5 million barrels, much worse than the 950,000 build traders were looking to get. Cushing, Oklahoma inventories declined by 724,000 barrels as traders were looking for a build of 500,000 barrels. The EIA report negated the API’s large build of 2.167 million barrels with a huge drawdown of 2.724 million barrels.
Expectations were for a large drawdown of 1.7 million barrels. Distillates surprised with a build of 1.939 million barrels on expectations of a 600,000 barrel decline. US production also surprised as it increased by 152,000 bpd to 8.597 million bpd. No one seemed to care however as Crude held its gains. Crude was able to rally off the 50 DMA support level and it also overtook the July 18 high of 46.93, making a high of 46.95. Crude settled at 46.79 and ended the trading session at 46.94 just off the high. Crude Oil closed above its downward sloping trendline and a failure to get back below the trendline will lead to tests of resistance at 47.75 and then 48.25. Support is at the trendline and then the 50 DMA at 45.64 for Thursday.
High 46.95
Low 45.84
Last 46.94
Daily Pivot Points for 8/18/16
R2 47.69
R1 47.31
PIVOT 46.58
S1 46.20
S2 45.47