Although oil bulls pushed black gold higher after yesterday market's open, their triumph was very short-lived. Looking at the daily chart, it even tempts to say that their rally took place on an empty tank. Why? Because thanks to yesterday's decline oil bears not only made short positions more profitable but also gained next pieces to their puzzle. Let's check them together in today's alert.
Today's alert will start a little differently than usual, because we will take you on a small journey to the past and we'll recall the quote from our Oil Trading Alert posted on Friday:
(…) In our opinion, the pro-bearish scenario is also reinforced by the fundamental factors. (…) EIA data showed that the u.s. output remains above 10 million barrels per day, which keeps domestic production on track to meet the earlier estimate for an increase to 11 million barrels per day in late 2018. If American drillers will not let down, the U.S. will overtake Russia in crude oil production and become the largest global supplier. Such development will likely not please Saudi Arabia and may thwart OPEC efforts to reduce black gold's stockpiles, increasing worries over another crude oil glut. In such an environment oil bulls could have problems keeping the price not only above $60, but also above the psychological barrier of $50.
From today's point of view, it seems to us that our gloomy (at least for the bulls) vision of the crude oil's future from the previous week slowly begins to take on real shapes. Those of you who watched yesterday's EIA data already know that the report showed a larger than expected increase in crude oil inventories.
For those who missed yesterday's numbers, we remind that crude oil stockpiles increased by 3.019 million barrels for the week ended Feb. 23, missing forecasts for a rise of 2.4 million barrels. Additionally, gasoline inventories rose by 2.483 million barrels, disappointing expectations for a decline of 190,000 barrels.
On top of that, U. S. production jumped to 10.3 million barrels per day, hitting a new record high. In this way, the output increased more than 20% since mid-2016, which suggests that soaring oil production could fill the gap in supply created by the OPEC and non-OPEC producers in the coming months. If the situation in the oil market develops in line with the above assumption, fears that the U.S. drillers activity could dampen earlier efforts to cut supplies will likely push the price lower in the coming weeks and maybe even months.
