Crude oil continues to make new highs, and benchmarks are currently trading at the best levels since late 2014. Yesterday's API figures, which showed crude stocks falling at a lower rate relative to consensus estimates, failed to dent the rally. While markets have been focused on supply issues, the latest economic data points to continued global GDP growth which is supportive for demand. This week, strong manufacturing PMIs in the Eurozone, Japan and the US are helping the 'globally synchronized growth' narrative. Despite the ongoing optimism, we have warned that the long crude oil trade is becoming increasingly one-sided and at the risk of a short-term pullback. While sentiment looks stretched, the crude oil rally remains intact thanks to demand growth running ahead of supply. Our short-term and medium-term trending indicators remain bullish.
WTI is currently trading above $62.0. Brent crude is currently above $68.10.
Looking at US crude oil stocks, the most recent EIA figures (December 28) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were lower than estimates (-4.6m vs. -4m expected). Gasoline stocks were up (+0.6m vs. +1.5m expected) while distillate stocks (+1.1m vs. -0.8m expected) were lower. Looking at reactions in markets, crude oil prices were mixed following the EIA report.
As crude oil continues to make gains from pipeline closures, we are upgrading the commodity to bullish. Note that both WTI and Brent are looking overbought. 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, note that both Brent and WTI are looking overbought.