Oil recovers from 7-month low as US inventories drop

A drop in the US oil inventories last week added credence to the oversold technical conditions and yielded correction/relief rally in the oil prices. 

At the time of writing, Brent oil was trading just short of $55 handle. Prices clocked a 7-month low of $44.34 on Wednesday. The daily RSI is still oversold. WTI oil printed a low of $42.03 yesterday and was last seen trading around $42.65 levels. 

The data released in the US yesterday showed the inventories fell 2.5 million barrels in the week ended June 16. Markets were expecting a decline of 2.1 million barrels. The good news didn’t just stop there. Gasoline stocks decline 578K barrels, beating the estimated gain of 443K barrels. 

Despite the bullish data, the recovery in oil prices is anaemic. Markets also shrugged off bullish sound bites from the OPEC - members are considering deeper production cuts. As mentioned earlier, the RSI is oversold, so a technical correction may gather pace.