April looked very promising. The price of the black gold was advancing higher and we broke few major resistances. On Wednesday, something snapped. The price fell sharply and in one day erased almost whole April upswing! What was the trigger and what was the general reason of that panic selling?
First let us start with the trigger. For that we do have two factors, one major and one minor. Minor factor is that the USD is a bit stronger yesterday and the second one – major was the data about crude oil Inventories. This came as expected but looking a bit deeper, on U.S. Gasoline Inventories, we could see a huge beat there. We were expecting approximately 2 million decline and we got over 1.5 million rise. And again, that was just a trigger. The real sentiment behind this movement is, in my opinion different.
I think that the recent upswing was largely based on the false faith in the OPEC and the possible extension of their agreement. Even if that will happen, the lower supply from those countries will be covered by non-OPEC producers! Simple is that. What is more, the global demand is still low. No rocket science here, combination of those two means lower prices.
Technically, the buy signal that was present not so long ago is erased. Bears are back on the market and are hitting with a large power. As long as we stay below the 52 USD/bbl, the sentiment stays negative. But that is the mid-term. Next few days most probably we will be able to experience a small bullish correction here but it should not distract the traders from their main mission – going short on the Oil.
Chief Analyst – Alpari Research & Analysis Limited
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