Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 28 March 2018 at 7:33 GMT

Crude oil double top and EIA stock report in focus – #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Increased stocks, equity wobbles and stronger USD all weaken oil
  • But chart actions have done little damage to the bullish sentiment
  • A break below $64/WTI and $68/Brent needed to sour the tone

By Ole Hansen

Crude oil trades lower following the failure – so far – to break the January tops in WTI crude oil at $66.66/b and Brent crude oil at $71.28/b. The risk of a double top combined with a bigger-than-expected jump in crude oil stocks reported by the API last night, renewed stock market weakness and a stronger dollar have all helped reverse some of last week's strong gains. 
So far the chart actions have done little damage to the bullish sentiment and it would take a break below $64 on WTI and $68 on Brent for that to change.

Crude oil charts
 Source: Saxo Bank

According to the latest COT report covering the week to March 20, funds went into this holiday-shortened week with a very bullish outlook. Long positions in Brent and WTI were outnumbering shorts by a ratio of 13 and 17.9 respectively, the latter being close to the record witnessed just before the market collapsed back in August 2014. 

COT: Long/short ratios
The key focus today is the weekly petroleum status report from the EIA at 14:30 GMT. Oil traded lower overnight after the American Petroleum Institute (API) last night reported a surprisingly big jump of 5.3 million barrels of crude oil. This, combined with the potential biggest rise in crude stocks in a year at Cushing, the delivery hub for WTI crude oil in Oklahoma, more than offset a bigger-than-expected drop in gasoline stocks.  

EIA survey and recent results
From a seasonal perspective, rising crude oil stocks and falling product stocks are what can be expected at this time of year when refinery maintenance reduce demand for oil and the production of products.

EIA: Crude and gasoline stocks
 – Edited by Clare MacCarthy


Ole Hansen is head of commodity strategy at Saxo Bank

matsuri matsuri
Mr. Ole, do you think that WTI can fall as far as $62.57? what is more the spread between WTI andd Brent has widened to almost $6.
Ole Hansen Ole Hansen
That would signal a return to the 200 day ma and a 61.8% retracement of the March rally. Anything is possible in the oil market given how the focus/theme changes on a regular basis. Iran/Venz. supply worries likely to provide support but against it we the elevated spec long that needs to be feed bullish news.
The spread will contract by almost 80 cents once the expiring May Brent contract is being replaced with June Brent tomorrow.
matsuri matsuri
and is WTI in contango or backwardation? it was mentioned by you in one of prevoius articles that it is back to contango? is it still valid?
Ole Hansen Ole Hansen
WTI close to contango again ahead of an expected build at Cushing. Prompt spread traded in backwardation by just 4 cents.
Ole Hansen Ole Hansen
EIA results and initial market reaction
Ole Hansen Ole Hansen
EIA charts
Anatoly Vyacheslav Anatoly Vyacheslav
This comment has been redacted


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