This week’s price action in daily oil prices has been distorted by “rogue trading” from one of the world’s biggest oil brokers PVM here in London and goes some way to explain Tuesday’s candle on the oil chart.  Briefly, during early trading in Asia at approximately 02.00 GMT an extremely and unusual trade was placed for 9000 lots (or even more) of Brent Crude which is equivalent to around 9m barrels of oil.  To put this into context the output of Saudi Arabia on a daily basis is around 11m to 12m barrels.  On the day this trade spooked the oil market for two reasons: firstly, the sheer volume at this time of night would normally suggest a geo political event of major importance triggering buying on this scale and once again to put this into context normal trading volumes would be around 500k barrels.  Secondly, the timing of this trade which again was unusual as trades of this size would normally not happen during this session.  As a result oil prices shot to $73 per barrel with the Brent Crude Prices pushing the WTI higher with many traders deeply puzzled and alarmed.  The “error” has been put down to a possible “fat finger trade” and the company has been unwinding its positions as a result with a potential loss of around $10m.  My own personal view is that at this time of night it could have been one of the office cleaners merely doing some light dusting to the keyboards (I joke - but you never know).  As I use volume in my own trading I was certainly confused myself as the volume spike on the day was enormous and at the time I wasn’t sure whether it was a technical glitch or a true reflection of the trading volumes - now we know.  In the meantime yesterday’s wide spread down bar reflected both the fall in equity markets following the worse than expected NFP data and probably not helped by the above unwinding of positions by PVM, closing $3.18 down on the day and touching an intra day low of $66.27 last seen on June 23rd.  From a technical perspective the wide spread down bar of yesterday found some support at the 40 day moving average which will now prove critical to prevent a deeper move in crude oil prices.   Today’s price action is likely to be both muted and random given the thin volumes (unless PVM decide to sell a few more million barrels!!) owing to the 4th of July celebrations in the US.  Have a great weekend and a Happy 4th of July.

The short term trend is sideways the medium term trend is bullish while the long term trend is bullish.

WTI:

Support:    $66.27 (yesterday’s low)                              Resistance: $70.92 (high of 25/06/09)

Support:    $65.98 (40 day moving average)               Resistance: $70.21 (high of 22/06/09)

Support:    $64.96 (low of 03/06/09)                              Resistance: $69.70 (yesterday’s high)

OIL (BRENT):

Support:    $66.21 (yesterday’s low)                              Resistance: $70.51 (high of 25/06/09)

Support:    $65.90 (low of 23/06/09)                              Resistance: $69.62 (high of 22/06/09)

Support:    $65.41 (40 day moving average)                        Resistance: $69.19 (yesterday’s high)