May crude oil traded higher into Wednesday morning (March 30th) as Janet Yellen’s dovish comments plus the slightly lower API inventory builds (from the consensus outlook) had buyers in control of the market. Crude reached a high of 39.71 before retracing to 39.17 as traders braced for the EIA report on inventories. The report showed a build in overall inventories of 2.3 million barrels, which was lower than the consensus view of 3 to 3.25 million barrels. It was also lower than the API report’s 2.6 million barrel build. Cushing’s inventory fell by 272,000 barrels and gasoline declined by 2.5 million barrels. Gasoline was in line with consensus. Crude rallied on the news, making a new high 39.85. The rally couldn’t be sustained as buyers ran out of gas and crude collapsed, trading down to 38.14, just below the rising 21 DMA (38.21) support level.
This was a new low for the day and price recovered slightly to settle at 38.32. A Reuters’ survey was released showing that OPEC production increased in March by 100,000 barrels. This brought production to 32.47 million bpd. The increase in production came from Iran and Iraq as both nations continue to increase their production. This probably led to the change in market tone. This increase occurs as analysts are expecting a freeze to January levels, from the OPEC – NOPEC meeting that is supposed to happen on April 17, 2016. In my opinion, if crude oil can get below the 21 DMA, I think price has a chance to test support down at 36.15. Thursday is month end, 1st quarter end. Volatility could increase for the day. Use stops appropriate for your account size and risk tolerance.
CLH16
High - 39.85
Low - 38.14
Last - 38.30
Daily Pivots for 3/31/16:
R2 40.47
R1 39.39
PIVOT 38.76
S1 37.68
S2 37.05