Well, no one saw that coming.

As if the API’s estimate for a 12 million barrel drawdown in US stockpiles wasn’t eye-catching, the official EIA data, released today, has surprised even the most optimistic of forecasts. The 14.5 million barrel decline was the biggest fall since 1999 and oil prices have absolutely soared higher. The good news is that we have also seen a sharp drop in stocks of gasoline. Obviously this is just one week’s worth of data and it remains to be seen in the coming weeks and months whether the trend can be sustained. For oil prices to rise significantly, we will need to see some further large drops in US oil inventories as they are still near record high levels.

But traders appear to be buying oil now and will be asking questions later. WTI has surged above the key $46.50 resistance, a level which could turn into support upon a potential re-test at some point down the line. If $46.50 does not hold as support then the short-term bias would turn bearish once again. WTI now needs to break above the descending trend line at $47.20, which was being tested at the time of this writing. If it starts to move above the trend line then it may go on to break the next resistance at $47.45 before embarking on a potential rally towards the prior swing high at $49.10 and that $50 hurdle once again.


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