Head fake in oil- blackgold is still heading south

Oil and the United States Oil Fund (ticker USO) have more than erased yesterday's rally, as West Texas Intermediate is down more than 4.5%, Brent down by 3.6% and the USO falling by more than 4%. This follows the negative sentiment following the election results here in the U.S. and comments from Mario Draghi who stated that the Euro-zone not only remains weak but that the weakness is spreading to Germany. The Energy Information Administration also reported today that the oil inventories rose for the week ended November 2, here as reported by RTT News
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Crude oil and gasoline inventories in the U.S. moved up during the week ended November 02, official data showed Wednesday.

The U.S. Energy Information Administration in its weekly crude oil report said U.S. commercial crude oil inventories increased by 1.80 million barrels to 374.80 million barrels last week, and are above the upper limit of the average range for this time of year.

The week before, crude oil inventories decreased 2.0 million barrels to 373.10 million barrels.
Moreover, total motor gasoline inventories moved up by 2.90 million barrels last week, after increasing by 0.90 million barrels in the prior week, and are in the middle of the average range.

Analysts were expecting crude oil inventories to gain by 1.80 million barrels last week
Late Tuesday, data from the API revealed that U.S. crude oil inventories eased 27,000 barrels and gasoline stocks up 1.40 million barrels in the week ended November 02.
Oil refinery inputs averaged about 14.70 million barrels per day during the week, which were 183,000 barrels per day below the previous week's average as refineries operated at 85.40 percent of their operable capacity.

Meantime, U.S. crude oil imports during the week averaged 8.00 million barrels per day last week, up by 89,000 barrels per day from the previous week, official data revealed. Over the last four weeks, imports have averaged about 8.30 million barrels per day, which were 441,000 barrels per day below the same four-week period last year.
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I continue to believe that oil and the USO will both see lower prices. My target on the USO is for a retest of the June 2012 lows.

The USO is on pace to trade around 16 million shares in today's trading, well above any the benchmark volume measures between the current price point and below $30. In my mind, this suggests further selling pressure and downward price moves before the fund finds resistance. A move to $29.5 on the USO would represent 5% more downside.