May crude oil traded lower on Wednesday March 23rd, as high inventory builds in crude oil weighed on price. The EIA reported today that overall crude inventories rose by 9.36 million barrels, much larger than the expected 2.5 million. This is the 2nd largest build in a year. However, Cushing inventories declined by 1.26 million barrels and gasoline inventories by 4.64 million barrels. US production also declined to 9.038 million barrels. This large increase in inventory puts storage concerns back in traders’ minds. In addition to the storage capacity problems, the possible OPEC – NOPEC production freeze meeting in April appears to be a meaningless gesture on the part of producers to scare up price without doing anything about production.
Libya has joined Iran and will not appear at the meeting. They want to get their production back to levels seen before the security situation in the country degraded. Is Iraq next? Traders have treated potential freeze talks as if producers are actually cutting production levels. Demand has not grown to meet supply builds. Until this happens the oversupply situation should not change. Crude ended the day right at support (39.76); and Thursday is the last trading day for the week as Friday is a holiday. In my opinion, if traders continue to liquidate longs due to the 3-day weekend, a test of the next level of support at 39.02 is possible. The 38.39 level is the next level for support.
CLH16
High - 41.34
Low - 39.67
Last - 39.76
Daily Pivots for 3/24/16:
R2 41.93
R1 40.84
PIVOT 40.26
S1 39.17
S2 38.59