• WTI slides US$0.55 to US$64.7 amid higher-than-expected inventory. U.S. WTI crude futures decline 0.9% to US$64.7, weighed by another rough session for U.S. stocks, and followed by the supply data that showed sharp gains in U.S. crude supplies from the Energy Information Administration (EIA). EIA reported that crude oil inventories increased by 1.6m/barrels per day (consensus: +1.0m) in the week ended 23 March, gaining in four of the last five weeks. Overall, the U.S. crude oil production rose to a fresh all-time high of 10.4m bpd last week, keeping it above Saudi Arabia's output levels and within reach of Russia, the world's biggest crude producer.
• Rising geopolitical tension will lend a good support. WTI has been “pressing significant resistance levels,” and it makes sense that investors would cash in on those gains as a holiday-shortened week (due to Good Friday). Despite recent pullback from YTD high of US$66.6, we see good short term supports near US$60.0-2.0 levels amid rising geopolitical tension in Middle East after US President Donald Trump appointed hawkish officials to his government, signaling the nation may pursue a more hard-line approach toward OPEC-member Iran.
• Moreover, top exporter Saudi Arabia saying it was working with top producer Russia on a historic long-term pact that could extend controls over world crude supplies by major exporters for a 10 to 20 year agreement.

• Pullback support near US$62.0-63.0 zones. As per our <WTI: Potential triangle breakout> report dated 20 Mar, oil prices staged a triangle breakout on 21 Mar and reached our envisaged YTD high of US$66.6 on 26 Mar. However, higher-than-expected US crude inventories saw WTI retraced 2.9% from the peak to US$64.7 overnight, producing a negative bearish Evening Star candlestick to hint a potential double top may be in the works. Key supports are situated near US$63.3 (61.8% FR) and US$62.0 (support trendline) but a daily close below the US$62.0 support will drive prices lower towards US$59.0-60.0 territory. Alternatively, a decisive break above US$66.6 will spur prices towards US$68.0-70.0 areas.

Source: Hong Leong Investment Bank Research - 29 Mar 2018