Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

On Wednesday, crude oil gave up some gains after EIA report showed a larger-than-expected build in U.S. crude oil inventories. Additionally, OPEC cut its forecasts for global oil demand growth in 2016, which affected negatively investors’ sentiment as well. What’s next?

Although light crude moved higher after EIA showed that gasoline inventories decreased by 4.237 million barrels for the week ending on April 8, the commodity reversed and declined on news that domestic crude oil stockpiles increased by 6.6 million barrels (well above analysts’ forecasts) and distillates inventories rose by 505,000 barrels. Thanks to this increase, U.S. crude oil inventories came back at historically high levels for this time of year, which doesn’t bode well for the commodity.

Also yesterday, OPEC cut its forecasts for global oil demand growth in 2016 warning of potential reductions among customers in China and Latin America. Because of these circumstances, light crude slipped under the March high, but will we see further deterioration?

In our opinion, as long as oil investors have hopes for an agreement between OPEC and non-OPEC producers on a plan to freeze crude production at January levels the price of crude oil will not fall significantly and we can even see an increase to around $45-$45.60, where the nearest resistance zone (created by the 76.4% and 78.6% Fibonacci retracement levels based on the entire Oct-Feb decline) is.

We will keep you – our subscribers – informed should anything change.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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