Crude oil has been slowly weakening for the past three days. Looking at the latest news, OPEC raised its demand forecast in 2018 and suggested this would result in falling stockpiles. It also cut its supply forecast for non-OPEC suppliers. Last month's report showed a deficit of 310,000 barrels per day, while OPEC's 2018 forecast calls for a deficit of 830,000 barrels per day. We published our thoughts on supply/demand dynamics in the crude oil market in a thought piece published yesterday. Based on projections from the International Energy Agency, our view remains that surging US supply is likely to spoil the crude oil rally in 2018. For now, the bull market remains intact.
WTI is currently trading just above $56.50. Brent crude is currently above $62.80. The commodity remains overbought in the short-term according to technical indicators.
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.