Crude oil prices are mostly flat today. Yesterday, crude oil strengthened despite a much larger-than-expected build in crude inventories (as per EIA data) and some strength in the US dollar. While the consensus expected stocks to rise by 0.54m barrels, the actual figure was +6.8m million barrels. A large increase in crude inventories is typically negative for the commodity. On the plus side, gasoline inventories fell by 2m barrels (versus estimates of +1.9m barrels), helping to allay concerns regarding falling end-user demand. In other news, US crude production has increased to 10m barrels per weak, a feat last achieved more than 50 years ago. Crude oil output also rose from OPEC members, as Nigerian and Saudi Arabian production accelerated. While the prospect of US shale supply overwhelming demand has dominated news headlines in the past few years, demand continues to grow faster than supply. Looking at the underlying fundamentals, the commodity remains in a bull market. Our short-term and medium-term trending indicators suggest a bullish trend.
WTI is currently trading above $64.60. Brent crude is currently above $68.80.
Looking at US crude oil stocks, the most recent EIA figures (January 31) showed rising crude oil stocks and falling gasoline inventories. Crude oil inventories were much higher than estimates (+6.8m vs. -0.5m expected). Gasoline stocks were down (-2.0m vs. +1.9m expected) while distillate stocks (-1.9m vs. -1.3m expected) were also down. 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.