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FRONT MONTH BRENT's early dip to $54.44 (currently back up to circa $54.80) brought thoughts of the 2-month rising trendline into play a break of which, TECHNICAL ANALYSIS suggests, would lead to a deeper correction.

  • Extended the 12-month uptrend to $58.37 (3 Jan high), before ranging over a 2-month rising trendline currently at $54.27.
  • Easing daily studies concern and below $54.27 signals a deeper correction to $52.81 (8 Dec higher low), before bulls try resuming the wider uptrend.
  • The recently completed 16-month inverted head and shoulders base over $27.10 (20 Jan 16 low) combines with constructive weekly/monthly studies to support this view.
  • An eventual clearance of $58.37 targets $63.25 (.764x 27.10/52.86 off 43.57), perhaps $69.33/69.63 (equality of $27.10/52.86 off $43.57 and 6 May 15 peak).
  • Only decisively under $52.81 (8 Dec higher low) averts, signals a 2.5-month top and risk deeper correction to the $50.49/51.51 gap (30 Nov/1 Dec 16), perhaps a 12-month tentative rising trendline at $48.31.

The move back under $55 (still well within the post-production deal range) was instigated by Tuesday's US API inventory data and quells talk of front-end BACKWARDATION for the time being.

The official DoE numbers at 15:30GMT will not just be watched for oil inventories. As we mentioned Tuesday, GASOLINE stocks (at close to record peaks even on a seasonal basis) are also under scrutiny, in particular implied demand (measured by total motor gasoline supplied). The 4-week moving average of the latter plummeted to 8.2mn brls last week a level not seen since 2012. If this sort of demand level continues, the sharpness of the fall would imply the US consumer isn't in the best of health � a negative for the US economy and oil demand.

Technicals: ed.blake@informagm.com

Fundamentals: marcus.dewsnap@informagm.com

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