Crude Oil (WTI) has seen 8 weeks of the bulls in control of this market. The demand for this commodity has been reflected in the number of draw-downs in stockpiles each week from the EIA (Energy Information Administration). You can see the table below:
The amount of draw-downs exceeds the amount of builds in inventories, which has resulted in the bulls being in control for the past 8 weeks.
After coming to an end of the bulls being firmly in control, we had received the information that there had been a build in inventories of +2 million barrels. This information added to the growing suspicion that at some point the bears are going to take back control and take profits off the table. We also had some negative talk from OPEC which added fuel to the fire.
Now if you’re a technical trader (I know most of you are) then a lot of you would have seen that wicky candle above the arrow marked bull trap and probably would have been in the thinking that’s the start of a breakout. How wrong you were, the big players were artificially inflating the price because they needed spreads to be as close to Brent Crude as possible to make the rollover attractive. Once all that liquidity was introduced back into the market after everyone’s stops had been triggered, they were free to sell.
Another catalyst that has added to the drop in price of Crude oil, is the fact that Energy stocks had gained momentum and had started to pick up, which in turn means that money has been flowing out of this commodity.