Crude oil trading has been fairly volatile in the past few days. Crude rose sharply last Thursday following the Saudi king's visit to Russia. Prices then fell sharply the next day, following news that Saudi Arabia and Russia are walking back from discussions to extend OPEC's supply cuts. Hurricane Nate also weakened to a tropical depression, after initially making landfall as a category 1 hurricane. As we recently wrote in our bull case for crude, rising inflation expectations may power the commodity to new highs in the near future. Our medium-term outlook on crude remains neutral, as prices remain range-bound.
This morning, both Brent crude and WTI are rebounding. WTI is still below $50, and is currently trading just below $49.70. Brent crude is currently above $56.00, having weakened down to $55.50 last Friday. After entering overbought conditions earlier this week, crude oil is now trading within a normal range.
Having rebounded in the second week of October, we are upgrading crude oil back to neutral. 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.
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.