[This article originally appeared on HardAssetsInvestor.com and is republished here with permission.]
The Department of Energy reported this morning that in the week ending June 12, U.S. crude oil inventories decreased by 2.7 million barrels, gasoline inventories increased by 0.5 million barrels, distillate inventories increased by 0.1 million barrels and total petroleum inventories increased by 2.7 million barrels.
Crude oil sold off after the release of the latest inventory figures. After a volatile 10 months through April, prices haven't done much during the past several weeks. Instead, both Brent and WTI have formed a comfortable trading range as traders assess the still-uncertain fundamental backdrop.
Last week, we noted that Brent is still in an uptrend from a technical perspective. Prices have managed to stay above an upward-sloping trendline that extends back to January, as can be seen from the chart below:
Prices must continue to remain above this line to keep the uptrend intact. Better yet, at some point, bulls will want to see Brent make another run at the May rebound-high at $70.
On the other hand, if prices fall below the trendline, as we suspect they may, it doesn't necessarily mean prices will plunge, but it does suggest that the easy upside has already been captured.
During the past year, we've repeatedly opined that we expect this downturn in crude oil prices will be longer lasting than many appreciated. We've said that prices will stay lower for longer; with crude oil currently fluctuating in the $50's and $60's, that's precisely what is happening.
While up from the cycle-low in the $40's, oil prices are still relatively low when compared with where they were since 2010. We expect they will remain this way as U.S. production continues to grow and traders begin to appreciate how resilient the oil boom is.