Crude oil prices are universally lower today. Despite the impact of a weaker dollar (crude tends to trade inversely to the US dollar), the commodity is currently weakening. While yesterday's EIA data showed crude stocks falling faster than consensus estimates (which were fairly bullish following API figures earlier this week), US crude production has also recovered. Rising US supply threatens the fundamentals driving the crude oil market this year, and prices are falling accordingly. The latest figures show US crude production at 9.75m barrels per day. The EIA estimates that production will surge to 10m barrels per day later this quarter, eventually hitting all-time highs around 11m barrels per day later this year. The other issue threatening crude oil is the significant build-up of speculative positions in futures markets. We first raised this issue last November. Our short-term and medium-term trending indicators continue to suggest a bullish trend.
WTI is currently trading above $63.10. Brent crude is currently above $68.60.
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.