Crude Oil Prices Plunging to 3-Month Low Ahead of EIA Inventories Report

U.S. West Texas Intermediate crude oil futures are weaker and near a 3-month low on Wednesday as investors brace for the release of this week’s government inventories report.

The market is also attempting to recover from yesterday’s steep sell-off, but overnight weakness in regional banks has brought back fear of contagion in the banking sector, putting pressure on riskier assets like crude oil.

Technically, counter-trend buyers are being motivated by cheap prices after the market tested its lowest level since last year and an important value area.

Fundamentally, OPEC’s upwards revision for Chinese consumption off set bearish investor sentiment fueled by three U.S. bank failures earlier in the week. However, with the problem resurfacing overnight, crude oil could not hold onto any of those earlier gains.

At 10:56 GMT, June WTI crude oil futures are trading $70.71, down $0.91 or -1.37%. On Tuesday, the United States Oil Fund ETF (USO) settled at $62.95, down $2.30 or -3.52%.

API Reports Supply Build, While OPEC+ Remains Committed to Production Cuts.

In supply related news, U.S. crude oil inventories rose by about 1.2 million barrels in the week ended March 10, in line with a Reuters poll, while fuel stockpiles fell, according to market sources citing American Petroleum Institute figures on Tuesday.

Additionally, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told Energy Intelligence on Tuesday that the OPEC+ alliance – OPEC and allied oil producers including Russia – will stick to production cuts agreed in October until the end of the year.

Finally, the U.S. Energy Information Administration will publish weekly inventory data at 14:30 GMT. It is expected to show a build of 1.2 million barrels.

Daily June WTI Crude Oil Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out the Dec. 12 main bottom at $71.25. A move through $80.97 will change the main trend to up.

The nearest resistance is a Fibonacci level at $73.05. The closest support is the futures contract’s 50% level at $68.76.

Daily June WTI Crude Oil Technical Forecast

Trader reaction to $71.57 is likely to determine the direction of the June WTI crude oil market on Wednesday.

Bearish Scenario

A sustained move under $71.57 will indicate the presence of sellers. If this continues to pick-up momentum then look for the selling to extend into $68.76.

Watch for a technical bounce on the first test of $68.76. But if it fails then look for another acceleration to the downside with $61.27 the next major target price.

Bullish Scenario

A sustained move over $71.57 will signal the presence of counter-trend buyers. This will put $73.05 back in play. Overcoming this level could trigger a strong short-covering rally.