Crude price fell sharply on Tuesday, as traders sold for profits after prices surged early to a two-year high on an unplanned closure of the pipeline that carries the largest North Sea crude oil grade. WTI for January delivery closed at $57.375, with declining roughly 0.96 percent.
Futures rose for a third straight day after the American Petroleum Institute was said to have reported U.S. oil inventories dropped by 7.38 million barrels last week, which is more than twice the 2.89 million decline forecasted by a Bloomberg survey of analysts. If the industry group’s tally will be confirmed by the Energy Information Administration on Wednesday, it would be the biggest withdrawal since August.
Declining inventories should be supportive for oil over the short term, according to Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. “The data suggests that refiner demand for oil is very strong.”
Brent and West Texas Intermediate oil both plummeted on Tuesday as worries eased about the supply impact of a major pipeline outage in the North Sea. Since an agreement on extension of supply cut has been confirmed by the Organization of Petroleum Exporting Countries and allied producers such as Russia through next year, oil prices had been and will likely be trending higher for the next few months.
Still, the OPEC-led accord faces a threat from American shale drillers, whom government forecasters expect will boost output next year to more than 10 million barrels a day. Future movement of oil prices, hence, will be influenced by American suppliers planning.
Technically when we look at the weekly chart of WTI to see its long-term trending, it is developing along with the ascending price channel, which started from April 2016. While it is now facing a resistance found at the upper line, and still struggling on it for the past few weeks. If it fails to edge higher and break out, investor should look for a short position.
Chart 1: WTICOUSD Weekly
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