Crude oil prices are selling off today. Commodity prices have been weak thanks to the US dollar rebound ahead of tomorrow's Federal Reserve meeting. Crude oil has an inverse relationship with the US dollar. While Brent and WTI continue to look overbought on a weekly chart, this is no longer true on a daily chart. There are a large number of speculators who are long crude oil contracts based on futures and options data from US exchanges. Looking at inventory data, estimates for this week's EIA numbers call for a fairly modest fall in inventories. In recent history, US crude oil inventories have fallen at a rapid clip. Thanks to seasonal factors, crude oil demand is likely to trend lower as refineries undergo maintenance. Surging US production and the rising rig count are additional factors weighing on the commodity. Our short-term and medium-term trending indicators suggest a bullish trend.
WTI is currently trading above $64.80. Brent crude is currently above $68.90.
Looking at US crude oil stocks, the most recent EIA figures (January 24) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were lower than estimates (-1.1m vs. -2.0m expected). Gasoline stocks were up (+3.1m vs. +2.5m expected) while distillate stocks (+0.6m vs. -1.5m expected) were also up. Looking at reactions in markets, crude oil prices rose following the EIA report.
As crude oil continues to make gains, we are upgrading the commodity to bullish. Note that both WTI and Brent are trading within normal conditions. This is based on technical indicators on the daily chart.
As crude oil rebounds, 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.