Hopes that crude oil price would sustain the advance above $30 a barrel appear to have been dashed on Wednesday as the US crude oil inventories rose by 4.6 million barrels in the last week. Data from the Energy Information Administration (EIA) showed that this figure was lower than the market’s projection of a rise by 8.5million barrels.
The market reaction was surprisingly adverse as crude oil prices continued on the path to a decline on the day without noticeable recovery, trading at $29.30 or 8.29% lower on the day as at the time of filing this report.
Perhaps, the indication that US crude oil refineries pumped 216,000 barrel per day above the previous week’s output spooked investors who are hoping that overburdened storage facilities could be freed up soon.
A careful study of the chart pattern on the daily chart for Brent crude shows that the price move from the break of the falling wedge to the resistance at 31.69 correlates with the expected measured move for the pattern. Without accompanying support from fundamentals on the day, crude oil price advance halted as short-term traders took profits.
Extension of today’s decline could retest the 28.38 former resistance, which now acts support. If this level fails to hold, then 24.68 and 22.35 could become the new possible targets for declining prices.
On the flip side, a bounce off 28.38 allows for another retest of 31.69. A successful break beyond this level could target the 35.61 price level, which is a resistance formed by previous highs of 13 March and 9 April. The critical march towards $40 per barrel must also contend with a possible pitstop at 38.56.