Oil drops sharply on mounting oversupply worries

January 6, 2016

The sentiment around the oil markets was hit badly this Wednesday, and the prices resumed the broader downtrend amid persisting supply glut worries ahead of the weekly EIA report

Brent hits 11-yr low, WTI falls to 2-week low 

Currently, WTI drops -1.29% to 35.50, while the Brent oil plunges nearly 2% to 35.75 levels, retreating slightly from fresh 11-year low struck at $ 35.53. Oil prices wiped-out corrective gains and fell back in the negative territory as rising supply worries overshadow the ongoing tensions between Saudi Arabia and Iran. 

According to a Reuters poll of eight analysts, in the United States, concerns over mounting stock levels were ongoing, with crude inventories likely to have risen by 439,000 barrels last week.

Moreover, strengthening greenback across the board ahead of the FOMC minutes, adds further to the downside in the oil prices. The US dollar trades near one-month highs at 99.60, up 0.12% on the day.

Markets now await the US EIA weekly inventory report due later in the NY session for further moves on the black gold. Markets are predicting a rise of about 133,000 for last week.

WTI Oil Technical Levels

WTI oil has an immediate resistance which stands at 37/37.10 (round number/ Jan 5 High) above which gains could be extended to 37.71/79 (daily R2/ Dec 31 High). While to the downside, the immediate support is at 35 levels below which the prices could drop to 34.63 (Dec 17 Low) levels. 

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