Crude oil Daily Updates

07 February 2018

Crude oil prices are moving lower today, despite taking a breather yesterday. Following the recent stock market rout, safe haven assets such as the US dollar and the Japanese yen are rallying. As crude oil is negatively correlated to dollar strength, the commodity is weakening in response. Yesterday, data from the American Petroleum Institute showed a surprise drop in crude stocks. Consensus estimates had called for an increase of 3.3m barrels. Given that API data often conflicts with official data from the US EIA, crude oil tends to react more strongly to government figures. EIA figures will be announced later today. As Asian stock markets have underperformed today, the US dollar has resumed strengthening. Later today, we will downgrade our short-term outlook on crude oil neutral as the rally runs out of momentum. Our medium-term outlook remains bullish.    

WTI is currently trading above $63.0. Brent crude is currently above $66.70.

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.

Short term outlook

As crude oil runs out of steam, we are downgrading the commodity to neutral. Note that both WTI and Brent are trading within normal conditions. This is based on technical indicators on the daily chart. 

Medium term outlook

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 WTI and Brent are trading within normal conditions.