could be the beginning of the end for higher oil prices though,
as U.S. shale oil production will jump as soon as the crude
price climbs. The U.S. is the third-biggest oil producer and
produces 9.176 million barrels per day (bpd), according to the
U.S. Energy Information Administration (EIA).
The spot WTI crude oil price tumbled 3.95% to an intraday low of $35.29 a barrel on Wednesday, after the EIA reported that U.S. commercial crude oil inventories rose to 490.7 million barrels, up 4.8 million barrels in the week ending December 11, compared to the analysts’ expectations of an inventory decline of 2.5 million barrels. The EIA said stockpiles at Cushing, Oklahoma, the delivery point for WTI futures and the biggest U.S. oil-storage hub for WTI futures, rose by 607K barrels to 60.056 million barrels, approaching the April 17 peak level of 62.2 million barrels. Total storage capacity for the site was 71.4 million barrels as of March 31, according to the EIA.
Excluding the Strategic Petroleum Reserve (SPR) of about 695.1 million barrels, U.S. crude oil inventories remain near the peak level of 490.9 million barrels set in the week ending April 24, 2015. On Tuesday, the American Petroleum Institute (API), an industry group that represents about 400 oil and natural gas corporations, said its crude oil inventory data for the week ending December 11 showed a rise of 2.3 million barrels.
As of December 8, there are 253,141 long positions of light sweet crude oil futures, traded on the New York Mercantile Exchange (NYSE) by managed money or hedge funds, an increase of 2,084 long positions from the previous week, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC). This is compared to about 178,888 short positions, an increase of 7,083 short positions from the previous week where light sweet crude oil contracts are traded in units of 1,000 barrels. Hedge funds continued to increase their net short positions by about 4,999 contracts, as they are betting that the crude oil price could go lower.
From our technical viewpoint, the crude oil price just bounced off the trendline support of the descending (DES) wedge chart pattern at $34.53 a barrel, as its downtrend continues in a bearish lower low chart pattern, meaning every low (L) is lower than the previous low. If the trendline support can’t hold, the crude price could drop to $33.55 a barrel, or the February 12, 2009 low. In order to establish an uptrend, the crude oil price needs to break out and stay above the October high of $50.92 per barrel level. There are walls of resistances between the current price and that October high, though.