Crude oil is down this morning, after rising sharply yesterday. Yesterday's EIA data showed big reductions in crude inventories, helping to support the narrative of limited supply. In other news, crude oil supply from Kurdistan has halved to 225,000 barrels per day, versus typical volumes of 600,000 barrels per day. According to Reuters, Iraqi sources are claiming technical glitches for the slowdown. One official claimed that operations are set to resume in 24 hours, but were halted due to Tuesday's military operations.
WTI remains above $50, and is currently trading just above $51.30. Brent crude is currently above $57.30. After entering overbought conditions two weeks ago, crude oil is now trading within a normal range.
Looking at US crude oil stocks, the most recent EIA figures showed falling crude oil stocks and rising gasoline inventories. While crude oil inventories fell much more than expected (-5.731m vs. -4.1m barrels expected), gasoline stocks surged (+0.908m vs. +0.05m expected). US crude inventories have been falling for the past few weeks. Looking at reactions in markets, crude oil prices were steady following the EIA report.
After rising sharply on October 10, we are upgrading crude oil to bullish. Saudi Arabia recently committed to reducing exports in November while significant US offshore production remains offline. 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 a strong performance in the second week of October, we are now bullish on crude oil in the medium-term. Crude stocks continue to fall around the world, helping the 'rebalancing' narrative. Furthermore, the recent the seizure of Kurdish oil assets near Kirkuk and Trump's refusal to certify the Iran deal are increasing expectations of lower future supply. Looking at various technical indicators on the weekly chart, crude oil is looking neither overbought nor oversold, but remains within normal trading conditions.