Crude oil fell yesterday and is flat this morning. WTI prices fell following news that TransCanada is set to re-open the Keystone pipeline this week. An API report that showed rising crude inventories also led to weakness for North American crude benchmarks. Brent crude was also down yesterday. Today is the last trading day before OPEC's announcement tomorrow. The cartel and Russia are widely expected to cut crude oil supply beyond March 2018. Speculators have built record positions in crude oil as a result, while North American oil producers have been hedging their production on futures markets. While our outlook on crude remains bullish in the medium-term, this comes with the caveat that the OPEC event is a significant risk.
WTI is currently trading just above $57.50. Brent crude is currently above $63.20.
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 weakens following OPEC concerns and more supply, we are downgrading the commodity to neutral. Note that both Brent and WTI are now trading within a normal range. This is based on technical indicators on the daily chart.
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.