Crude oil prices are flat today after moving sharply lower following US EIA data announced yesterday. Looking at the figures, commodity markets reacted to sharply higher US crude production figures. Production jumped from 9.92m barrels per day to 10.25m barrels. As US shale production has been beset by various infrastructure bottlenecks (including shortages of sand and transportation-related issues), the jump in production was ahead of consensus expectations. The long-term production record, last set in 1970, was 10.044m barrels per day. Despite the big jump in US supply, the outlook for crude oil remains bullish trend thanks to strong Chinese demand and OPEC supply cuts. Looking at crude oil fundamentals, demand continues to grow faster than supply. While we downgraded our short-term outlook to neutral yesterday, our medium-term outlook remains bullish.
WTI is currently trading above $61.60. Brent crude is currently above $65.30.
Looking at US crude oil stocks, the most recent EIA figures (February 7) showed rising crude oil stocks and gasoline inventories. Crude oil inventories were lower than estimates (+1.9m vs. +3.3m expected). Gasoline stocks were up (+3.4m vs. +1.1m expected) while distillate stocks (+3.9m vs. -1.2m expected) were also up. Looking at reactions in markets, crude oil prices fell following the EIA report.
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.
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.