Despite strength in the US dollar, crude oil rose yesterday and is up slightly this morning. As commodities are priced in US dollars, strength in the currency tends to weigh on crude oil. Instead, the commodity is rallying as Chinese demand remains strong. According to data from the General Administration of Customs, China imported 9.01 million barrels per day (bpd) in November. This was second highest figure ever recorded. According to BMI Research, reliance on imported crude oil will rise from 68% in 2017 to 80% by 2021 as the country suffers from falling crude oil output. We downgraded our short-term outlook on crude to neutral yesterday. Our medium-term outlook remains bullish.
WTI is currently trading just above $56.80. Brent crude is currently above $62.40.
Looking at US crude oil stocks, the most recent EIA figures (December 6) showed falling crude oil stocks and rising refined inventories. Crude oil inventories were lower than estimates (-5.6m vs. -3.5m expected). Gasoline stocks were up (+6.8m vs. +1.9m expected) while distillate stocks (+1.7m vs. +1.2m expected) were also up. Looking at reactions in markets, crude oil prices fell following the EIA report.
As crude oil pulls back following the OPEC event and US data, 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 trading within a normal range.