Crude oil prices have mostly ignored a record drop in US inventories. According to recent US EIA figures, the fall in inventories (-6.9m vs. -3.4m expected) blew past consensus estimates. Inventory data for gasoline and distillate stocks was also fairly supportive. Crude oil prices are usually fairly sensitive to EIA data announcements. While the commodity has rallied in recent history following good announcements, today's price action may suggest that bullish optimism is getting extreme. We have been highlighting large speculator net positions in futures & options exchanges since last November as a potential risk to the ongoing rally. Looking at fundamentals, growth of US production is also a significant threat. Our short-term and medium-term trending indicators continue to suggest a bullish trend.
WTI is currently trading above $63.70. Brent crude is currently above $69.10.
Looking at US crude oil stocks, the most recent EIA figures (January 18) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were lower than estimates (-6.9m vs. -3.4m expected). Gasoline stocks were up (+3.6m vs. +4.0m expected) while distillate stocks (-3.9m vs. +0.0m expected) were down. 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 both 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, note that both Brent and WTI are looking overbought.