Oil is on track to break through the key psychological level of $50 a barrel after a ninth straight rise in U.S. crude stockpiles came at exactly the wrong moment, analysts said on Wednesday.
The amount of crude oil in U.S. storage rose to another record high on Wednesday, jumping 8.2 million barrels from the previous week, the Energy Information Administration reported. The increase was more than four times what analysts expected.
Weekly figures also showed U.S. oil production continuing to tick up toward 9.1 million barrels a day, the highest level in more than a year. That provided further evidence that rising American output is confounding efforts by the Organization of the Petroleum Exporting Countries, Russia and 10 other exporters to reduce global oil inventories by curbing their own output.
For the last three months, oil has traded in a range between $49.61 and $55.24 but the data sent U.S. benchmark West Texas Intermediate crude prices plunging more than 5 percent to a nearly three-month low.
The plunge through a number of lows on Wednesday puts oil on a path to test the December low of $49.95 a barrel and from there you could accelerate with our downside target, at $42.70.
On Tuesday, Saudi Oil Minister Khalid al-Falih warned at CERAWeek that the kingdom would only support OPEC’s intervention in markets for a “restricted period of time” and would not “underwrite the investments of others at our own expense and long-term interests.”
We initiated a short position on US Oil at $50.70 and we are targeting $42.70 for the next 6 months.