BZ:Crude Downtrend Continues as U.S. Data Disappoints
(eToro Blog) Oil prices continued sliding on Tuesday and in early trading on Wednesday as the world's largest consumer — the United States — continues releasing disappointing economic data. The price of oil has declined for the last five days in a row with reports of increasing supplies and U.S. economic reports indicating waning growth in the U.S. economy.
Tuesday saw the benchmark West Texas Intermediate September futures contract drop -$1.10 to close at $93.79 or -1.2 percent per barrel on the NYMEX after trading as low as $93.08, while Brent crude shed -$0.35 to close at $116.46 per barrel in London. Early trading on Wednesday has the NYMEX futures contract down -$0.41 to 93.38.
Futures action after the close on Tuesday had the contracts rise after a report from the American Petroleum Institute indicated inventories for crude had fallen by -3.3 million barrels in the week ended on July 29th. The number surprised the market and was significantly higher than the consensus of a -900,000 barrel decrease. Gasoline stocks also showed a huge increase of +2.5 million barrels, versus an expected increase of only 100,000 barrels.
Adding to the downward pressure on crude was news that China's throughput of crude would possibly grow +8.5 percent to 9.2 million barrels a day for 2011 according to China's Industry Ministry. Traders will be eyeing Wednesday's Energy Information Administration's release of last week's oil inventories, which are expected to show an increase of +1.3 million barrels, versus 2.3 million the previous week.
Trader sentiment in oil continues to favor the bears, with continuing weakness in the U.S. economy and increasing supplies. Nevertheless, despite fundamental factors still favoring lower oil prices, an unforeseen event could take prices higher.
Oil dealers will now be keeping an eye on Tropical Storm Emily, expected to reach the island of Haiti in the next day. If the tropical storm develops into a hurricane, refineries and oil platforms in the Gulf of Mexico could be at risk.
On the technical front, the price of oil will now need to recover above the 95.50 level in order to result in additional upward momentum. If surpassed, resistance then shows at the 98.75 and 99.56 levels, ahead of the major July 20th peak of 100.14. Support is now initially seen at the Tuesday low level of 93.08, and then below that in the 91.43/70 region and at the key psychological 90.00 level.
