The newest weekly oil inventory report shows that crude oil stockpiles fell by 3.169 million barrels, which is larger than the expected drop of 1.565 million barrels. Gasoline inventories stayed the same, with a decrease of 0.908 million barrels that matched predictions. Distillate stocks, however, increased by 2.931 million barrels, opposite to the expected decrease of 1.135 million barrels. Cushing inventories rose by 0.455 million barrels, compared to a previous week’s increase of 0.213 million barrels.

Crude Oil Price Movements

Crude oil prices have dropped, down by $0.45 or 0.69%, currently at $64.95 per barrel. Prices are hovering around the 100-day moving average of $64.94, with a lower range identified between $64.48 and $64.70. Falling below these points could signal a further decline, with the next target around $64. Despite the larger-than-expected drop in crude oil, the latest inventory data suggests a bearish outlook for oil prices. The surprising increase in distillates, which include diesel and heating oil, points to reduced economic and industrial demand. This detail is more critical than the overall numbers, explaining the current dip in prices. This perspective is backed by recent global economic data. The S&P Global Flash U.S. Composite PMI dropped to 50.9 in October 2023, the lowest it has been in three months. This decline matches the fall in fuel usage indicated by the distillate figures. We believe these concerns about demand are outweighing supply worries for now.

Technical Analysis and Trading Strategies

The technical signals from the report reinforce this caution. Crude oil’s inability to stay above its 100-day moving average shows weakness. We see this level as a new short-term ceiling for prices. Historically, large increases in distillate inventories have often led to economic slowdowns and lower oil prices, as seen before the 2008 recession. The current data might indicate a similar, albeit milder, trend. Thus, we should consider any price increases as chances to initiate bearish positions. For derivative traders, this means buying put options or setting up put spreads to benefit from a potential price drop. If prices break below the key support range between $64.48 and $64.70, we will look to target strikes near the $64 mark. This approach provides a way to position for the decline we expect with defined risk. Create your live VT Markets account and start trading now.

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