Crude oil is mostly weaker this morning, after selling off last Friday. Brent crude is weaker, while WTI remains flat. Last Friday, the US oil rig count fell by five to 742. Oil rig counts typically increase following rallies in crude oil. While rigs are a good proxy for crude oil supply, they tend to lag crude oil prices by a few months. Given the rally in crude oil prices since last summer, we expect future rig count data to tick up. Given big long crude oil positions in futures markets, we expect the commodity to undergo a short-term correction. Crude oil is also looking overbought on the daily and weekly charts looking at various technical indicators. In the longer-term, enthusiasm for global growth should keep crude oil on a strengthening path. Our short-term and medium-term trending indicators continue to suggest a bullish trend.
WTI is currently trading above $61.50. Brent crude is currently above $67.60.
Looking at US crude oil stocks, the most recent EIA figures (January 4) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were lower than estimates (-7.4m vs. -5.4m expected). Gasoline stocks were up (+4.8m vs. +2.3m expected) while distillate stocks (+8.9m vs. +0.3m expected) were also up. 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.