Crude oil has now traded down for two days in a row. Despite falling crude stocks and tensions in the Middle East, the commodity remains weak. Crude prices fell sharply following outgoing PBoC Governor Zhou's comments regarding an upcoming 'Minsky Moment' in China. The Governor was referring to China's excessive debt and investment-led economic model. Crude prices have continued to fall during London and New York trading hours.
WTI remains above $50, and is currently trading just above $51.0. Brent crude is currently above $56.90. 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 falling sharply on October 19, we are downgrading crude oil to neutral. Following strength in mid-October, crude oil pulled back after Brent crude moved into overbought territory. After weakening, both WTI and Brent are now trading in normal conditions. This is based on technical indicators on the daily chart.
After a mixed performance in the third week of October, we are now neutral on crude oil in the medium-term. While crude stocks continue to fall around the world, rising US exports are driving concerns regarding 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.