Crude Oil Daily Technical Outlook

Another week of huge build in refinery products! The US Energy Department reported that gasoline inventory rose +1.9 mmb, compared with consensus of +0.9 mmb, to 213.1 mmb in the week ended June 26. For distillate, the pace of increase has picked up again over the past few week and it surged +3.74 mmb to 158.7 mmb, the highest level since 1985. Although crude oil stockpile drew -2.9 mmb, compared with market expectation of -2.8 mmb, the pace of decline has continued to slow down. Added to the concerns was another week of rise in stockpile (+1.58 mmb) at Cushing, Oklahoma, where WTI crude is stored.

The benchmark crude oil contract extends weakness and plunges to 61.36 after the report. Contract prices of petroleum products such as heating oil and gasoline also got hit.

Crude oil's fall extends further and reaches as low as 61.87 so far, meeting mentioned 38.2% retracement of 43.83 to 73.38 at 62.09 as expected. At this point, intraday bias remains on the downside as long as 64.96 minor resistance holds. Deeper decline should be seen to channel support at 59.95 next. Break there will confirm medium term reversal and target key resistance turned support at 54.66. On the upside, above 64.96 minor resistance will turn intraday outlook neutral and bring recovery, probably to retest double top neckline at 66.2. But upside should be limited well below 73.38 and bring fall resumption.

In the bigger picture, the case of reversal continues to build up with daily MACD staying below signal line and recent doubt top reversal pattern (73.23, 73.38). Focus will now turn to channel support at 59.95. Sustained break there will indicate that whole rise from 33.2 has completed at 73.83, ahead of 38.2% retracement of 147.27 to 33.2 at 76.77. The three wave structure of the rise from 33.2 to 73.83 will in turn indicate that it's part of wide range consolidation only and hence, will open up the bearish case for a retest of 33.2 low. On the upside, break of 73.83 is now needed to confirm that rise from 33.2 is still in progress. Otherwise, risks remain on the downside.