Crude oil prices are very slightly weaker today. The US dollar is mostly flat. Last Friday, the commodity sold off sharply following strong US non-farm payroll figures which were ahead of expectations. Rising jobs and higher wages typically signals stronger future inflation, and increases the probability of future rate hikes from the US Federal Reserve. The US dollar strengthened following the announcement, and crude oil sold off in response (the commodity is negatively correlated with the US dollar). Following the latest correction, Brent crude is no longer looking overbought on a weekly chart. Turning to data, the Baker-Hughes oil rig count rose by six rigs to 765 last week. Rising rigs is a good proxy for increasing US crude oil production. As optimism for global growth remains strong, and demand continues to outstrip supply, crude oil remains in a bull market. Our short-term and medium-term trending indicators suggest a bullish trend.
WTI is currently trading above $64.90. Brent crude is currently above $67.90.
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 WTI is looking overbought. Brent is trading within normal conditions.