Crude Oil Price Update – Crushed by Greater than Expected Rise in Gasoline, Distillate Stockpiles

U.S. West Texas Intermediate crude oil futures finished lower on Wednesday after the U.S. government reported a bigger-than-expected increase in fuel stocks. The move was just the cherry on the top of a sell-off driven by concerns over weakened worldwide growth, partly due to high energy costs.

On Wednesday, January WTI crude oil futures settled at $72.01, down $2.24 or -3.02%. The United States Oil Fund ETF (USO) finished at $63.67, down $1.56 or -2.39%.

China Demand Could Rise

This week’s plunge has come as a surprise due to supportive news out of China. China, On Wednesday, the world’s biggest crude importer, announced the most sweeping changes to its anti-COVID regime since the pandemic began. This comes on top of the news that the country’s crude oil imports in November rose 12% from a year earlier to their highest level in 10 months.

EIA Reports Mixed Results

In domestic news, The U.S. Energy Information Administration (EIA) on Wednesday reported a 5.2 million barrel draw in crude stocks. Traders were looking for a 3.5 million barrel draw.

This was potentially bullish news, but the government also reported that U.S. distillate stocks grew by 6.2 million barrels, far exceeding estimates for a 2.2 million barrel rise. Gasoline inventories climbed 5.3 million barrels against expectations for an increase of 2.7 million barrels.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Wednesday’s low at $71.75 will reaffirm the downtrend. A move through $83.34 will change the main trend to up.

The market closed inside a major retracement zone at $72.31 to $63.73. The nearest resistance is a Fibonacci level at $78.72.

Daily Swing Chart Technical Forecast

Trader reaction to the major 50% level at $72.31 will determine the direction of the January WTI crude oil futures contract on Thursday.

Bearish Scenario

A sustained move under $72.31 will indicate the presence of sellers. If this move continues to generate enough downside momentum then look for an eventual test of $63.73.

Bullish Scenario

A sustained move over $72.31 will signal the presence of buyers. This could trigger a short-covering rally into a minor pivot at $77.55, followed by a Fibonacci level at $84.43.

Side Notes

Longer-term traders may view $72.31 to $63.73 as a major value area. It is the 50% to 61.8% retracement zone of the contract range. Don’t be surprised if a support base forms inside this zone.