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Crude oil slightly lower between rising supply and tensions in the Middle East

Crude oil daily update

BY DEB SHAW | 

Crude oil daily update

Crude oil prices are currently slightly lower. Last Friday, crude oil prices jumped ahead of Saudi Crown Prince Mohammed bin Salman's appearance on the US TV show "60 Minutes". Prior to the event, traders covered their short bets on the commodity, causing crude oil prices to spike. During the show, the Crown Prince compared Iran's Ayatollah to Hitler while threatening to develop nuclear weapons if Iran develops nuclear technology. 

Today, the commodity is slightly weaker as concerns regarding supply resurface. While US energy demand is at 11-year highs, US crude oil production is also surging at the same time. Last Friday, the oil rig count rose by four rigs to 800. The rig count is seen as a proxy for US supply. Most crude oil forecasts expect supply to surpass demand this year. Since 2016, prices of the commodity have been supported by demand rising faster than supply. 

In other news, Senator Bob Corker expects Trump to walk away from the Iran nuclear deal in May according to Reuters. If the US imposes fresh sanctions on Iran, the country's capacity to export crude oil is likely to be crippled as a result. Venezuelan crude oil supply has also been falling, as the country struggles to increase production under its socialist government. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish. 

WTI is currently trading above $62.0. Brent crude is currently above $65.90.

Looking at US crude oil stocks, the most recent EIA figures (March 4) showed rising crude oil stocks and falling gasoline inventories. Crude oil inventories were higher than estimates (+5.0m vs. +2.6m expected). Gasoline stocks were down (-6.2m vs. -1.6m expected) while distillate stocks (-4.4m vs. -1.3m expected) were down. Looking at reactions in markets, crude oil prices fell following the EIA report.

Updated 
Short term outlook
Bullish
Medium term outlook
Bullish

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