Crude oil blew a gasket today plummeting by over 5%, sparked by a double whammy of inventory reports. The weekly EIA report released today showed a rise of 8.21 million barrels of crude oil. This piggybacked the bearish API report released yesterday, which showed an 11.6 million barrel build in crude oil inventories yesterday. The overwhelming supply build washed away any bullish news of record compliance provided by OPEC over the last several months. There are now 528.4 million barrels in storage, the highest since record keeping began in 1982, according to Bloomberg.
This selloff essentially busts the rally that began on Nov. 30 when OPEC announced it would cut production. The upward trajectory of Crude had stalled and consolidated between $52-$56 over the last 3 months. Today that range was definitively broken to the downside. This is technically very bearish, as weak longs will abandon their positions, and momentum traders will jump on the selloff. April Crude futures are closing in on $50 as I write, which should provide initial psychological support. However the $48 mark is where crude was trading prior to the OPEC inspired rally, and a good target based on a channel that Crude has been trading in for nearly a year. Traders should look to sell bounces up to the previous range support in the $52-$53 area. There looks to be very good trading opportunities for crude in the coming months.