Oil prices sold off in New York after the US Energy Information Administration report highlighted crude stockpiles fell -0.9M, much less than the eyed -1.5M analysts’ consensus. Imports also surged 0.8M barrels to 8.44M, the highest level since December 2012.
OPEC also reported 2015 revenue at $518.2B, -45.8% year over year, a 10-year low. The drop was not helped with an increase in export volumes as the collapse with oil prices hurt sales.
Price action on the US oil daily chart shows that the bearish butterfly pattern that formed earlier this month continues to respect the 50-day SMA. Price has maintained a stubborn $45.91 to $51.67 trading range. With the Brexit vote ahead of us, we could see risk on/off trade flows drive a kneejerk reaction. If we see bullish momentum resume, further resistance may target the $56.50 level.
If the downward pressure returns, key support will come from the 200-day SMA, which currently trades around the $40.97 level.
The trade: Buy US oil at $40.75, with a stop loss at $38.75 and take profit at $46.75. The risk/reward ratio is 1:3