Crude oil prices are mostly flat today after falling sharply yesterday. Thanks to the ongoing stock market rout, global risk appetite is falling. As a commodity, crude oil tends to strengthen during upturns and weakens during downturns. As a result, the commodity has been selling off alongside the stock market. Beyond risk sentiment, the fundamentals driving the rally are also getting weaker. Yesterday, OPEC member Iran announced a plan to increase supply by 700,000 barrels per day over the next four years. Earlier this week, crude oil fell sharply after US production rose to all-time highs. In our latest take on crude oil, we argue that the bull market is set to weaken and may potentially reverse later this year. Our short-term outlook is neutral, while our medium-term outlook remains bullish.
WTI is currently trading above $60.50. Brent crude is currently above $64.30.
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.