After strengthening yesterday, crude oil is taking a breather this morning. Looking at a weekly chart, crude oil continues to look overbought. WTI prices have been especially strong this week after a TransCanada pipeline oil spill in South Dakota. As one of the largest pipelines between the US and Canada will remain closed until the end of November, North American crude supply is likely to fall. Looking at OPEC, the meeting agenda was publicly released yesterday and is only 3 hours in duration. This suggests that the deal has already been negotiated, and that the event is more of a rubber stamping exercise. Rising OPEC-related expectations are also helping the crude outlook.
WTI is currently trading just above $58.50. Brent crude is currently above $63.60.
Looking at US crude oil stocks, the most recent EIA figures (November 22) showed falling crude oil stocks and flat gasoline inventories. Crude oil inventories were higher than estimates (-1.9m vs. -2.2m expected). Gasoline stocks were flat (+0.0m vs. +1.0m expected) while distillate stocks (0.3m vs. -1.3m expected) were up. Looking at reactions in markets, crude oil prices rose 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.