Good News/Bad Action: Prior to yesterday, NYMEX June crude oil had closed higher in 12 of 16 sessions since April 21st, gaining 21?% in the process. This rally was based more on technical momentum rather than on fundamentals. As such, higher prices had become the justification for even higher prices rather than the fact that crude oil supplies in the U.S. (commercial + SPR) had risen to 9 straight all-time highs.
Yesterday the DOE reported the first weekly decline since February 27th and only the third decline this year. More importantly, gasoline supplies plunged as refineries reined in production. The report was the first, in a long time, that could be reasonably construed bullishly. In other words, the bulls had more than enough ammo for a run at $60 WTI on the NYMEX.
In this regard, the bulls failed miserably.
Our friend Mark Fisher would probably dub yesterday’s action as good news, bad action. The bulls received good news, i.e. large, counter-seasonal draws in oil and gasoline, a plunge in imports and a drop-off in production… etc. Given WTI’s rapid ascent of the last three weeks, it would not have been unreasonable to expect yesterday’s report to perpetuate the bullish trend. Instead, the market faded a dime short of $60, trended lower through lunch and tanked in the final hour of trading… that’s bad action… and it is a potential telltale that the current run in oil is running out of gas, as it were.