30 September 2009 at 12:30 GMT
Crude oil and gasoline inventories exploded last week – in the numerical sense rather than the incendiary – and we expect that today’s numbers from the US Department of Energy to also show a large build up.
In the normal run of things, a large build up is followed by another large build up, which means that we are setting up for some short-term volatility. Expectations are for an increase in crude inventories of about 2m barrels and 900,000 barrels for gasoline. In comparison, last week saw crude inventories grow by 2.8m and gasoline by 5.4m.
Recent support for crude has been around USD65, which is a big level. We remain slightly bearish on the back on fundamental inventory data and implied demand (which puts demand back at around 2001-2002 levels).
That means USD68.85 is a good level to go short – assuming it gets there – targeting USD65. At the break of USD65 target USD62.