Oil sinks ahead of EIA inventory data

Another large inventory build, reported by API on Tuesday, is piling further pressure on oil prices, as we await a more widely followed release from EIA later today.

Estimates suggest we may see a slight drawdown but that’s very much at odds with the near-five million barrel build that API reported. With oil now trading back near the recent lows, we could see a real test of whether there was actually any substance behind last week’s rebound.

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WTI Daily Chart

A break below $50 in WTI crude could be a very bearish signal in the near-term while at the same time likely being influential when it comes to OPEC+ meets to discuss output cuts early next month. It’s just a question of how low we go before traders sit up and pay attention to the cuts. We could see some support around $48 and $46 below, with the December low around $44 being the greatest test.

There are clearly significant forces working in both directions here but two of these – US/China trade war and OPEC+ extension – could be much clearer in a matter of weeks. Barring any clear indication of progress prior to this, a significant move in either direction may come up against resistance.

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