Crude oil prices have been disappointing this week, despite ongoing weakness in the US dollar. Earlier today, crude oil failed to meaningfully strengthen despite supportive inventory data. Relative to consensus estimates, EIA crude stocks were lower than expected. This was offset by US production figures which continue to accelerate. Turning to crude oil fundamentals, the International Energy Agency forecast that supply could soon outstrip demand. The organization suggested that a repeat of 2014 may be in store, when surging shale production catalyzed a dramatic sell-off in crude oil. Today, US shale production is once again rising quickly, although global demand remains healthy thanks to strong growth in most major regions. While other assets such as stock markets have rebounded following a sharp fall, crude oil prices remain flat. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $59.40. Brent crude is currently above $63.0.
Looking at US crude oil stocks, the most recent EIA figures (February 14) showed rising crude oil stocks and gasoline inventories. Crude oil inventories were lower than estimates (+1.8m vs. +3.0m expected). Gasoline stocks were up (+3.6m vs. +1.2 expected) while distillate stocks (-0.5m vs. -1.5m expected) were down. Looking at reactions in markets, crude oil prices were mixed 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.