Crude oil benchmarks are currently flat. Looking at recent news, Saudi Arabia’s Energy Minister Khalid al-Falih recently stated that major producers believe that cooperation should continue after supply cuts expire later this year. Specifically he stated that “There is a readiness to continue cooperation beyond 2018...The mechanism hasn’t been determined yet, but there is a consensus to continue.” While the news resulted in higher crude oil prices earlier today, the commodity is now trading sideways. Last Friday, the US rig count unexpectedly fell by five rigs to 747. Changes in the US rig count are seen as a proxy for US supply. Typically, higher crude oil prices result in a large number of oil rigs, increasing future supply. While many crude oil traders believed that crude oil prices would be ultimately capped by US shale oil, new US supply has been fairly slow. Our short-term and medium-term trending indicators continue to suggest a bullish trend.
WTI is currently trading above $63.40. Brent crude is currently above $68.70.
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.