Manipulating Oil for Fun and Profit

The EIA reported that crude inventories increased by 4.1 million barrels (+1.5MM expected), gasoline increased by 5.0 million barrels, and distillates increased by 8.4 million barrels.  It was an ugly inventory report, made all the worse by: (a) the recent DOE announcement of the sale of 8 million barrels from the Strategic Petroleum Reserve, (b) news that some OPEC members have already been caught cheating, and (c) data showing that US production continues to surge.Screen Shot 2017-01-12 at 6.15.49 AM

Naturally, oil prices sold off sharply on the EIA data.  Or, did they?  CL plunged about 0.75 in the first 5-10 minutes, then began a preposterous rally that continues even this morning.  After shedding 6.4% since last Friday, CL rallied 5.5% on the worst news in months.  2017-01-12 CL 5 0625What gives?  Could it have anything to do with the bearish Head & Shoulders Pattern that SPX completed when the EIA report was released?  SPX bounced at our initial downside target.  Yet, we remain short, with our downside targets unchanged.

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