Crude oil continues its sell-off after hitting its most recent peak on September 25. Recent API data has accelerated the sell off, as gasoline stockpiles rose above estimates (4.91m vs. 1m expected). Traders ignored the much larger-than-expected draw in crude oil stockpiles (-4.079m vs. -1.5m expected). Both WTI and Brent crude are trading lower. WTI is fighting to stay above $50, and is trading close to $50.15. Meanwhile, Brent crude is trading close to $55.60.
After breaching overbought territory last Monday, crude oil is now returning to more normal trading conditions. From a technical standpoint, oil prices have room to fall much further without any risk of heading into oversold territory. As prices are near a previous top, if the current $50/$55 (WTI/Brent crude) support area is broken, crude oil may fall sharply lower.
After running out of momentum following its recent peak on September 25, we are downgrading crude oil to neutral. The referendum in Kurdish Iraq has failed to ignite the commodity, while US oil production and exports continue to grow following Hurricane Harvey. While oil stocks around the world continue to fall, this has had a limited influence on prices in the last few weeks. Looking at various technical indicators on the weekly chart, crude oil is starting to look overbought, but remains within normal trading conditions.