Crude oil remains in short-term overbought territory, and has been flat for the last three trading sessions. Yesterday, rumors that Saudi Arabia's King Salman is set to abdicate the throne in 48 hours helped push crude oil prices up. Earlier this week, Crown Prince Mohammed Bin Salman purged many leading members of the Saudi royal family as part of an anti-corruption effort. Political instability from the Middle East, coupled with strong demand for crude oil have resulted in a big rally since the commodity bottomed last summer. Either way, crude is looking overbought based on technical indicators on a daily and weekly chart as well as sentiment figures based on the latest COT report. While our medium-term outlook remains bullish, caution is warranted.
WTI is currently trading just above $57.10. Brent crude is currently above $63.90.
Looking at US crude oil stocks, the most recent EIA figures (November 8) showed rising crude oil stocks and falling gasoline inventories. Crude oil inventories were higher, despite estimates that expected falling stocks (+2.2m vs. -2.9m expected). Gasoline stocks were down (-3.3m vs. -2.0m expected) and distillate stocks (-3.4m vs. -1.4m expected) were also down. Looking at reactions in markets, crude oil prices fell following the EIA report.
As the short-term crude oil bull market runs out of steam, we are downgrading crude oil to neutral. Note that both Brent and WTI remain in overbought conditions today. This is based on technical indicators on the daily chart.
Thanks to ongoing crude oil strength, we are upgrading the commodity to bullish in the medium-term. Prices are rising as crude stocks continue to fall around the world, despite rising US exports that are driving concerns regarding future supply. Looking at various technical indicators on the weekly chart, both Brent and WTI are looking overbought.