After rising last Friday, crude oil is down this morning. Looking at the latest Baker Hughes report, oil rigs operated by US energy companies has accelerated to 747 active rigs. As the number of oil rigs tends to lag WTI prices, more rigs are expected to come online over the next few weeks. US crude supply, currently running at 9.66m barrels per day, is the biggest risk to the ongoing crude oil rally. This is a big week for crude oil given the upcoming OPEC meeting on Wednesday. As we have outlined earlier, the OPEC event is risky for speculators who are long crude oil given substantial net long positions in US futures markets. If OPEC fails to meet expectations, crude prices may fall sharply as a result.
WTI is currently trading just above $58.40. Brent crude is currently above $63.50.
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.