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Crude oil daily update for 16th February 2018


Crude oil prices are mostly flat today. WTI rose sharply yesterday while Brent prices traded sideways. When WTI makes gains relative to Brent, it is a strong indication that US conditions are more supportive for crude oil relative to international conditions. Given surging US shale output, this is a somewhat surprising occurrence. As the WTI-Brent spread falls, the incentive for US producers to export crude oil are falling. Looking at the fundamentals driving the commodity, recent data has been fairly bearish. US supply continues to surge while EIA data is showing that crude stockpiles are now rising. While Saudi Energy Minister Khalid al-Falih hinted that exiting OPEC supply cuts was not on the agenda for the cartel's upcoming meeting in June, Russian Energy Minister Alexander Novak suggested that the country could exit the pact in 5 months. Recent moves in the commodity are more likely the result of a weakening US dollar, which is currently trading near 3-year lows. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.     

WTI is currently trading above $61.70. Brent crude is currently above $64.7.

Looking at US crude oil stocks, the most recent EIA figures (February 14) showed rising crude oil stocks and gasoline inventories. Crude oil inventories were lower than estimates (+1.8m vs. +3.0m expected). Gasoline stocks were up (+3.6m vs. +1.2 expected) while distillate stocks (-0.5m vs. -1.5m expected) were down. Looking at reactions in markets, crude oil prices were mixed following the EIA report.


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