Crude oil prices have been trading lower following US inventory data, recent strength in the US dollar, and weak economic data from China and Japan. Yesterday, crude oil began selling off despite API data that showed a smaller-than-expected rise in inventories. The sell-off accelerated following Federal Reserve Chair Powell's testimony to Congress, as he upgraded his outlook for US growth this year (causing the US dollar to spike). Finally, crude oil was weighed down following relatively weak data from both China and Japan. Official Chinese manufacturing PMIs were below estimates, while Japanese industrial production is the weakest since the 2011 tsunami. Looking at EIA figures, the consensus estimate is for crude inventories to grow by 2.75m barrels. Given recent weakness in the commodity, crude oil may continue falling thanks to concerns regarding both future demand (particularly in Asia) and supply. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $62.70. Brent crude is currently above $66.30.
Looking at US crude oil stocks, the most recent EIA figures (February 22) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were much lower than estimates (-1.6m vs. +2.5m expected). Gasoline stocks were up (+0.3m vs. -0.5m expected) while distillate stocks (-2.4m vs. -1.5m expected) were down. Looking at reactions in markets, crude oil prices were up following the EIA report.