Crude oil Daily Updates

06 October 2017

Crude oil rallied sharply yesterday, due a range of possible reasons. Tropical storm Nate is heading for the Gulf of Mexico oil region, potentially threatening US oil production and transportation infrastructure. Looking at the dollar, expectations for Trump's tax reforms are rising, helping the future inflation outlook. As we recently wrote in our bull case for crude, rising inflation expectations may power the commodity to new highs in the near future. We have raised our short-term outlook on crude to bullish follow yesterday's price action. 

WTI remains above $50, and is currently trading near $50.70. Brent crude is currently above $57, having bounced strongly from the $55.50 area. After entering overbought conditions earlier this week, crude oil is now trading within a normal range. 

Short term outlook

Crude oil prices jumped sharply on October 5 for a number of potential reasons. Recent news includes Saudi/Russian talks regarding an extension to OPEC supply cuts and increasing optimism regarding Trump's tax reforms. As such, we are upgrading the commodity to bullish in the short-term. We earlier 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. 

Medium term outlook

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.