Yesterday’s EIA report showing a much bigger than expected build in gasoline stocks was enough to tip crude oil prices ever further downwards as oil traders and investors come to realise that the recent commodity bull run is now rapidly running out of steam.   Whilst much of the recent rally in daily oil prices can be attributed to a combination of speculation and re-stocking (especially by China) the oil market is becoming increasingly aware that the short and medium term demand will not be as robust as had been once thought.  Indeed OPEC has suggested that the global demand for crude oil will now take at least five years to recover to pre financial crisis levels.  OPEC confirmed that the average consumption of its oil reached a peak of 31m barrels a day in 2008, before the crisis, but that it could be as late as 2013 before they see this level once again. Evidence that any recovery out of this current downturn may be premature can be found in the Baltic Dry Index which is, once again, flashing warning signals.

From a technical perspective yesterday saw daily oil prices touch an inter day low of $60.01 per barrel although a failure to breach this price point did see crude oil prices push back to $60.50 in later trading.  Overall daily oil prices lost a total of $1.68 or 3%, a level last seen on May 26th.  Technically yesterday’s down candle was significant for one reason and one reason only, simply that the close of the day found some support at the intermediate level outlined in yesterday’s market commentary and it will be interesting to see whether this platform is sufficient to provide a temporary, or indeed longer term, barrier to the current bearish move.  With the 40 day crossing both the 9 and 14 day moving averages the tone for oil prices is most certainly bearish.  However, we need to be cautious as after a such a steep and rapid fall it would come as no great surprise to see the oil bulls entering the market, particularly as we are at such a significant psychological price level, where automated buy orders may be triggered.  However, should this support region fail to hold we may well see a much deeper move back to re-test the consolidation region at the $50 to $52 per barrel level in the medium term.

The short and medium term trends are bearish while the long term trend is bullish.

WTI:

Support:    $60.01 (yesterday’s low)                              Resistance: $64.89 (high of 07/07/09)

Support:    $59.52 (low of 26/05/09)                              Resistance: $63.81 (high of 27/05/09)

Support:    $58.93 (low of 19/05/09)                              Resistance: $62.67 (yesterday’s high)

OIL (BRENT):

Support:    $60.30 (yesterday’s low)                              Resistance: $64.89 (high of 07/07/09)

Support:    $59.85 (low of 25/05/09)                              Resistance: $64.68 (high of 28/05/09)

Support:    $58.83 (low of 21/05/09)                              Resistance: $63.13 (yesterday’s high)

DOE Stock Figures (change in millions of barrels)

Crude -2.9 (-1.9)      Distillates +3.7 (+1.7)    Gasoline +1.9 (+0.8)