Crude oil fell yesterday (particularly WTI) following EIA data. Despite a big draw in crude oil inventories and rising gasoline stocks, markets focused on rapidly rising exports. WTI is now right around $50, having ended the day below $50 yesterday. Brent crude remains above $55, and is currently trading just below $56. This morning, prices have rebounded to a small degree. Earlier in the week, we published our thoughts on the risk from rising US exports and falling Chinese demand.
Looking at technical conditions, after breaching overbought territory last Monday, crude oil is now returning to more normal trading patterns. 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 peaking on September 25, both Brent crude and WTI prices have fallen and continue to fall. Despite fears of violence in Iraq's Kurdistan region and falling oil stocks, crude oil has been unable to continue its bullish momentum. We warned that crude oil looked overbought in the last week of September, based on various technical indicators when looking at a daily chart. Since then, the commodity has returned to normal trading conditions.
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.