Crude oil prices are currently slightly lower - both Brent and WTI and currently selling off. Last week, the commodity surged after President Trump walked away from the Iran nuclear deal. Thanks to renewed sanctions against the country, global crude oil supply is expected to fall by about 1m barrels/day. In an environment of elevated growth and tight supply, crude oil prices are rising as a result. Following last Friday's sell-off, crude oil prices are no longer looking overbought.
Looking more broadly at the commodity, some traders are questioning whether the Iran decision will continue to drive up prices. Major European powers and China have pushed back on US efforts to block Iranian crude oil exports. French producer Total continues to operate normally in the country, while China has signaled its desire to continue buying Iranian crude. According to a Reuters story last week, the White House has pushed Saudi Arabia and OPEC to fill any supply gap resulting from sanctions against Iran. US production also continues to rise. Last week, the number of producing oil rigs increased by 10 to 844.
Finally, the outlook for demand is getting softer as growth visibly decelerates in major economic regions such as Europe and China. While this has yet to show up in lower physical demand for crude oil (as physical demand tends to lag changes in growth), a weaker outlook for demand should ultimately weigh on crude oil prices. Our short-term and medium-term outlook on crude remains bullish.
WTI is currently trading above $70.30. Brent crude is currently above $76.90.
Looking at US crude oil stocks, the most recent EIA figures (May 9) showed falling crude oil stocks and falling gasoline inventories. Crude oil inventories (-2.2m vs. -1.0m expected) were lower than expectations. Gasoline stocks were down (-2.2m vs. -0.9m expected) while distillate stocks (-3.8m vs. -1.5m expected) were also down. Looking at reactions in markets, crude oil prices were higher following the EIA report.
As crude oil makes gains, we are now bullish on the commodity. Note that both Brent and WTI are trading within a normal range. 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.