EIA Petroleum Inventories Post 5th Consecutive Build

Yesterday before entering Trade Idea: Adding to USO July 17th $20 Put I posted that I thought there might be a leak in the API data from yesterday after the close showing a build or in the EIA data which we have seen what appear to be leaks in the past on numerous occasions.

The EIA (DOE) oil inventories came out at 10:30 showing the 5th consecutive draw (unlike API) at -1.95 mn bb on consensus of a +818k build. Hearing the data alone, one might think oil rocketed higher; point in fact it did , briefly. That was short lasted though as production levels were revealed to have hit a new cyclical high and as we expected yesterday upon adding to the USO put position, oil moved lower.

This morning's EIA inventories sent USO briefly higher and then to a new lower low since our additional put position entry yesterday.

I suspect someone knows something that is going to be beneficial for crude and that's why we have this base and while the put position is in place because I expect near term movement lower, the reason for oil moving lower I suspect has nothing at all to do with a bearish outlook for oil, quite opposite in fact.

One of the big mistakes of Technical traders is to assume higher prices and volume mean smart money is buying, the facts as we have observed them is they buy in to price weakness and sell in to price strength, thus the current decline we are riding with puts most likely has less to do with a bearish outlook for oil than it does a bullish one. 

This is the reason for price to fall back within the base and as it does, why we want to look for additional signs of accumulation of lower prices-that's smart money at work.