Crude oil prices are trading lower today, thanks to strength in the US dollar and concerns regarding crude oil fundamentals. Looking at a chart of the commodity, crude bulls should be concerned. Following the steep sell-off in early February, crude oil failed to rise beyond its previous highs ($66 looking at WTI). After making a lower-high a few days ago (around $62.50), crude oil prices are now pulling back. While a lower-high does not indicate an imminent bear market for the commodity, it is a clear sign that sentiment is turning weaker. As demand growth continues to grow ahead of supply growth, the underlying fundamentals are supportive for higher crude oil prices. However, the current bull market is clearly running out of steam. Turning to supply, markets will be closely watching EIA inventory and production data this week. Surging US production and Russian commitment to OPEC supply cuts are the biggest fundamental threats for the crude oil prices. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $60.90. Brent crude is currently above $64.50.
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.