It seems that WTI Crude did not receive the memo that yesterday was supposed to be bearish. Yellen's surprising hawkish comments drove stocks sharply lower and pushed Treasury yields higher yesterday. The USD was also strengthened due to safe-haven flows on top of higher rate expectations. All these should have driven risk correlated WTI Crude lower, but that did not happen. Iinstead prices actually climbed higher. It is not as though Crude Oil was immune to the broad negativity, as Brent Crude was trading lower.
The mystery deepens when we consider that the latest data from the Department of Energy reflected a higher than expected inventory buildup for the week of 14 March. Crude Oil inventories grew by 5.85 million barrels when analysts were calling for a 2.75 million hike. This suggests that implied demand for Crude is much lower than expected. Provided additional bearish pressure for Oil prices in US. Inventory in Cushing, OK did decline by slightly under a million barrels, that is much lower than the additional buildup in overall inventory mentioned earlier, and should not have a net bullish impact. Case in point, it is clear that the market actually reacted bearishly when the numbers were first reported, hitting below 99.0 initially before rebounding higher.
Hourly Chart
Hence, it is clear that prices rallied in spite of the DOE numbers, and not because of them. From a technical perspective, the failure to breach 99.0 along with the confluence and rising trendline suggest that the initiative is firmly within the bulls' court. By trading above 99.5 prices, bulls have also successfully mounted a bullish breakout and we could still see prices climbing higher. This would allow us to ignore the fact that Stochastic readings are at their highest Overbought levels in 2014.
That being said, the 100.0 round figure remains a tough challenge for bulls, and considering that there is very little going on in terms of fundamentals or global risk appetite that can propel prices higher, do not be surprised if the round figure ultimately holds even though sentiment for WTI is extremely bullish right now.
Daily Chart
Things are more optimistic on the Daily Chart though. The breakout of the descending Channel coincides with a bullish cycle signal seen in WTI, which suggests that the overall bullish uptrend since the beginning of January remains in play. A push toward the 101.0 significant resistance and potentially all the way to 105.0 and more is possible in the long run.
The only problem is that we will need a shift in fundamentals to justify a long-term gain scenario for WTI. Right now there isn't anything that suggests that this is even remotely possible. The Seaway pipeline expansion narrative is the only bullish event going for WTI right now, and it is unlikely that this development alone will be able to send prices all the way back to February levels.
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