Crude prices are up slightly this morning after falling yesterday. Looking at news, Reuters is reporting that expected OPEC cuts will ultimately be undermined by rising US production. Thanks to rising rig counts and improving efficiency of US shale oil extraction, US supply is forecasted to grow significantly in 2018. Given the importance of supply and demand dynamics in determining crude prices, this is bearish for crude in the longer term. We covered our broader thoughts on US supply in a recent commentary. Later today, will downgrade our short-term outlook on crude to neutral.
WTI is currently trading just above $56.50. Brent crude is currently above $62.40.
Looking at US crude oil stocks, the most recent EIA figures (November 15) showed rising crude oil stocks and falling gasoline inventories. Crude oil inventories were higher, despite estimates that expected falling stocks (+1.9m vs. -3.0m expected). Gasoline stocks were up (+0.9m vs. -1.5m expected) while distillate stocks (-0.8m vs. -1.2m expected) were down. Looking at reactions in markets, crude oil prices fell following the EIA report.
As crude oil rebounds on OPEC expectations, we are upgrading the commodity to bullish in the medium-term. Looking at various technical indicators on the weekly chart, both Brent and WTI are looking overbought.