Crude oil price, news and analysis:
- The US crude oil price is more stable Thursday after news of a huge draw in US oil inventories.
- That suggests Wednesday’s tumble on news that Libya is reopening four oil export terminals was overdone.
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US crude oil price recovers
The price of US crude oil is rallying after Wednesday’s sharp fall prompted by news that Libya’s National Oil Corporation is reopening four oil export terminals. The recovery was prompted by a report from the US Energy Information Administration that US crude oil inventories fell by 12.6 million barrels in the week to July 6, almost three times the drop expected.
The decline in stockpiles was the most in nearly two years, leaving inventories at their lowest since February 2015, and the consequent price rally suggests that Wednesday’s decline was overdone.
US crude oil Price Chart, Daily Timeframe (Year to Date)
Technically, the decline was halted by the 50-day moving average at $68.80 per barrel and a further rise to the 20-day moving average at $70.96 now seems possible if the $70 “round number” resistance level can be overcome.
However, sentiment data suggest a more pessimistic outlook. Retail trader figures show 53.5% of traders are net-long, with the ratio of traders long to short at 1.15 to 1. The number of traders net-long is 21.2% higher than yesterday and 46.8% higher from last week, while the number of traders net-short is 32.7% lower than yesterday and 44.9% lower from last week.
At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests the US crude oil price may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US crude oil bearish contrarian trading bias.
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--- Written by Martin Essex, Analyst and Editor