West Texas Intermediate (WTI) crude seen a large gain on the day after news that TransCanada Corp will begin operating on the southern leg of the Keystone XL pipeline that leads to the Gulf Coast. The oil company looks for deliveries to begin January 3 to Port Arthur, Texas through a segment that extends to Crushing, Oklahoma.
“With the pipeline up and running, you are going to see drops in Cushing inventories,” said Michael Lynch, president of Strategic Energy & Economic Research. WTI crude futures are delivered in Crushing, and futures seen a three-plus percent gain before stopping under $97 per barrel.
Tomorrow, the Energy Information Administration (EIA) will release their weekly crude inventories. Analysts forecast a drop in inventories by a half-million barrels. Over the last ten weeks, analyst forecasts have undershot the increasing inventories. There is speculation of declining inventories via the Keystone XL pipeline, but over the last seven weeks crude stockpiles have increased by 40.6 million barrels. Output hit a 24-year high of 8.02 million barrels per bay.
Price action is floating below $97 per barrel, but strongly rebounded from the lows. A crude momentum trade is likely to continue, even is inventories come in a bit heavy tomorrow. Daily support lies at $96.09 with price action resistance at $97.75. A pullback to $96.60 is possible before continuation.
The 50 and 20 EMA could provide dynamic resistance, but momentum still remains strong.