Crude Oil Technical Analysis / Commodity Trading Analysis

Oil Technical Analysis – Rise in Inventories

Bloomberg—Recent data has shown an unexpected rise in crude oil stored in the United States. Specifically, during the week ending November 17, 2023, there was an increase of over 9 million barrels. This jump is significant, especially considering the increase was just over 1.3 million barrels the previous week.

The magnitude of this rise was not anticipated by market experts, who had predicted an increase of only about 1.47 million barrels.

Why Does This Matter?

The stockpile of crude oil is a crucial indicator of market trends and economic health. A rise in oil inventories can have various implications. It’s essential to understand this in simpler terms.

Supply and Demand: The amount of oil in storage is influenced by how much oil is produced and how much is used. If inventories rise, it might mean that production is outpacing consumption. This can happen if there’s less demand for oil, perhaps due to economic slowdowns, or if production is particularly high.
Economic Indicators: The oil market is closely watched because it’s a key part of the global economy. Changes in oil inventories can signal shifts in economic activity.
Impact on Prices: Generally, if oil supplies increase significantly and demand doesn’t keep up, it can lead to lower Crude oil prices. This happens because there’s more oil available than people need or want.

Economic Implications

The substantial increase in the US crude oil inventories has several potential economic effects:

Positive Impact: Lower Crude oil prices can reduce costs for businesses and consumers. For instance, cheaper fuel prices can lower transportation costs, benefiting individuals and companies. This can positively affect the economy by increasing spending in other areas.
Negative Impact: On the other hand, if the rise in inventories is due to a decrease in demand, this could be a sign of economic slowdown. A reduction in demand for oil often indicates reduced industrial activity and less transportation, which are not good signs for financial health.

Conclusion: Beneficial or Detrimental?

Assessing whether this increase in crude oil inventories is beneficial or detrimental to the economy is complex. If the rise is due to increased production, leading to lower prices, it could be helpful in the short term. However, if it reflects a decrease in demand, possibly indicating a slowing economy, the implications could be more concerning.

Crude Oil Technical Analysis and Forecast

FxNews—The crude oil market has experienced a notable trend in today’s technical analysis. The price has slumped to the median line of the bearish channel, which was anticipated when the bears formed a bearish engulfing pattern near the upper band of the bullish flag.

Oil Technical Analysis – Rise in Inventories | Daily Chart

There is a possibility that the Crude oil price might find some ease around the middle line of the bearish flag. However, the likely target appears to be the S1 level, corresponding to the $72 support mark.