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 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.