API reports deficit, while WTI awaits EIA report: call updated

WTI has reached an interim support area around $42 per barrel, further decline is likely after a minor bounce back.

Key factors at play in Crude market –

• Oil market glut has shifted from crude oil to gasoline. According to latest IEA report, crude market is closer to balance but product stocks are very high and may work against price stability.
• Recent research by Rystand Energy has revised US crude reserve upwards to 264 billion barrels, more than Saudi Arabia and Russia.
• Goldman Sachs has called that crude recovery is over and price may once again drop lower.
• U.S. oil production has dropped to 8.49 million barrels/day and likely to drop further. It has declined by almost a million barrel from the peak.
• Major supply increase is taking place from the Middle East. Iran’s output rose 80,000 barrels/day in May to 3.84 million barrels/day. Saudi Arabia is expected to increase production to 11 million barrels/day.
• India has emerged as the biggest incremental crude buyer this year.
• American Petroleum Institute’s (API) weekly report showed the drop in oil inventory by 0.8 million barrels.

Today’s inventory report from US Energy Information Administration (EIA), to be released at 14:30 GMT.

Trade idea –

• Bears have taken control of the WTI and we expect the price to decline as low as $35 per barrel. WTI is currently trading at $42.7 per barrel. Key supports are at $42 and $35.