Earlier in the week, the spot WTI crude oil price surged 3.89%, to close at $37.89 a barrel on Wednesday, after the U.S. Energy Information Administration (EIA) reported that U.S. commercial crude oil inventories rose to 484.8 million barrels, down 5.9 million barrels in the week ending December 18, compared to analystsí expectations of an inventory increase of 1.1 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 2.045 million barrels to 62.101 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 18 showed a draw of 3.6 million barrels.
As of December 15, there are 254,885 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 1,744 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 175,477 short positions, a decrease of 3,411 short positions from the previous week where light sweet crude oil contracts are traded in units of 1,000 barrels.
Hedge funds increased their net long positions by about 5,155 contracts, the first time in 5 weeks, as they are betting on a crude oil price rebound.
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. In order to establish an uptrend, the crude oil price needs to break out and stay above the October high level of $50.92 per barrel. There are walls of head resistances which need to be broken first though, between $37.75 and $42.41 a barrel, that stretch out until the end of 2016.
Tom Kloza, OPIS Global Head of Energy Analysis, told CNBC that crude prices will retest the lows in late-February and March, when refineries go to maintenance, and he still thinks that prices are going to test the December 2008 level of $32.40 to $33. In that case, we could see crude prices stay underneath the 40s-level throughout 2016.