Today’s EIA Petroleum Status Update report for the week of Feb/27/2015 revealed a steep rise in inventories @ 10.3mm barrels vs. 8.4mm the previous week and forecasted level @ 4.16mm . The net result is 8 consecutive large increases and elevates commercial inventories to an 80-year high with 444.4mm barrels. Not helping matters is the continued weekly reduction in refining as gasoline supplies remained unchanged @ 0.0 vs. -3.1 barrels while distillates were down another -1.7mm barrels vs. -2.7mm barrels.
Thus far, the impact on energy prices or WTI Crude has been somewhat choppy, but prices appear to be stabilizing as evidenced by Saudi Arabia’s recent move to raise it per barrel prices by $1.40 and $1.00 respectively to Asia and the U.S. Other contributing factors to recent attempts at price stability may be macro-economic forces such as:
- quantitative easing
- interest rate reductions
- potential for supply disruptions caused by Islamic State militants in the Middle East
- and this summer’s upcoming peak driving season
The 4-hour timeframe chart indicates oil may be consolidating with potential for a reversal. If the bulls can push prices above the resistance of its most recent triple top (@ $51-$51.25) range, then prospects for WTI Crude trading near $54 per barrel is not that far fetched. Given that consensus bias is emphatically bearish towards energy, some traders and investors could get caught flat footed. Today’s price recovery in light of the aforementioned and overwhelmingly negative energy report was quite impressive and lends to a more buoyant outlook for short-term prices and a rally in crude oil futures.