Crude oil prices are trading lower today, following a recent surge higher. Last Friday, the US jobs report beat expectations by a wide margin while wage growth was below expectations. The report helped risk sentiment, as the US economy continues to grow while the risk of more rate hikes is relatively limited. Riskier assets such as equities and commodities (including crude oil) surged following the announcement. Crude prices were further supported by the fall in the oil rig count. For the first time in two months, the number of US rigs fell last week (by four rigs down to 796 in total). The number of oil rigs is generally seen as a proxy for supply. Turning to news, the Financial Times (paywall) is reporting that the IPO for Saudi Aramco is set to be delayed until 2019. Saudi Crown Prince Mohammed bin Salman is reportedly seeking a valuation of $2T for the company. According to the report, the company plans on floating a $100b stake, or 5% of the implied valuation of the company. Advisers have struggled to achieve the Prince's $2T valuation requirement. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $61.90. Brent crude is currently above $65.30.
Looking at US crude oil stocks, the most recent EIA figures (March 7) showed rising crude oil stocks and falling gasoline inventories. Crude oil inventories were lower than estimates (+2.4m vs. +3.0m expected). Gasoline stocks were down (-0.8m vs. -1.7m expected) while distillate stocks (-0.6m 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.