Crude oil prices are lower today after falling yesterday. Crude oil prices turned lower after the US EIA published a report forecasting more US shale supply yesterday. According to the report, crude production from major shale formations is expected to rise by 131,000 barrels per day in April to a high of 6.95 million barrels per day. After rising by 105,000 bpd in March, the pace of new supply is set to increase in the future. Unsurprisingly, crude oil prices fell following the announcement. While accelerating global growth and OPEC's supply cuts have helped crude oil rally since last summer, the prospect of surging US production and slowing growth in the future is weighing on the commodity. OPEC's supply cut agreement is also increasingly in doubt as time goes on. While the cuts were initially designed to slow down the pace of US supply, shale producers have been very good at bringing down their breakeven costs. As a result, OPEC's cuts are becoming less effective over time. Later today, we'll see US stockpile data from the American Petroleum Institute. Official API data will be released tomorrow. Our short-term outlook is neutral, while our medium-term outlook on crude remains bullish.
WTI is currently trading above $61.10. Brent crude is currently above $64.70.
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.