Crude oil prices are up sharply following reports that crude stockpiles are expected to fall this week. According to Bloomberg, data-provider Genscape will report that stockpiles in Cushing, OK have fallen further this week. This stands in contrast to the current consensus estimate, which calls for an increase of 3M barrels. Inventories are currently at the lowest levels since 2014, while recent economic data continues to suggest a sunny outlook for US GDP growth. Between backwardation (near-time prices are higher than future prices) and strong demand, US inventories are expected to continue falling. In other news, the International Energy Agency has claimed that rising US production will meet 80% of future demand growth. The agency expects US production growth to continue accelerating, while forecasting limited OPEC supply growth. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $62.50. Brent crude is currently above $65.50.
Looking at US crude oil stocks, the most recent EIA figures (February 28) showed rising crude oil stocks and gasoline inventories. Crude oil inventories were higher than estimates (+3.0m vs. +2.8m expected). Gasoline stocks were up (+2.5m vs. -0.8m expected) while distillate stocks (-1.0m vs. -1.0m expected) were down. 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.