July Crude Oil broke out above the May 26 high (50.21) yesterday, trading to 50.53 and settling at 50.36. This is the first close above the $50 mark since July 2015.
Traders continue to worry about Nigeria and the resulting supply disruptions caused by the Niger Delta Avengers. Their attacks on the oil infrastructure in Nigeria and the threats they are making if the oil companies attempt to repair the destruction is causing these companies to take a step back and wait for a peaceful resolution. They don’t want to put their employees in danger.
This continues to put pressure on supply. Nigeria is going to reach out to the Niger Delta Avengers and try to come to a peaceful end to the attacks. After settlement, the API report came out with another drawdown in US crude oil supplies.
Inventories were down 3.56 million barrels. Cushing also fell. Cushing inventories dropped 1.3 million barrels. Both declines were more than what analysts were looking for, with overall inventories expected to be down 3 million barrels but Cushing down 900,000 barrels.
The real surprise in the report were gasoline inventories. Gasoline has an unexpected build of 760,000 barrels, much better than the 100,000 barrel decline expected. This caused a temporary drop in Crude Oil to 50.29 before it recovered and ended the day at 50.43.
I would be a buyer on small dips in Crude Oil as I think the next resistant level (50.92) will be tested. Place stops according to your account size and risk tolerance.
Trendline support rises to 49.29 for Wednesday’s trade, and a close below here could lead to a bigger pullback in price.
CLH16
- High - 50.53
- Low - 49.44
- Last - 50.43
Daily Pivots for 6/8/16:
- R2 51.22
- R1 50.83
- PIVOT 50.13
- S1 48.74
- S2 49.04