Something weird is happening in crude oil: It’s not going down on bad news.
Last night the American Petroleum Institute reported energy stockpiles rose by 629,000 barrels, versus an estimated drop of 3 million barrels. Numbers from the Energy Department were even worse today, showing a growth of almost 6 million barrels. Remember, more supply should be bad for prices.
But after an initial swoon, crude oil futures (@CL) clawed higher and remained in the range around 67 that’s emerged this week. Technicians may also notice @CL is stabilizing near the same 100-day moving average where it bounced in June.
To break it down quickly, here are the bullish and bearish cases for oil.
First, the negative: The Trump Administration. In late, June the commander-in-chief got the Saudis to increase production in effort to depress prices. Last week, news reports said the U.S. might release oil from the America’s strategic reserve for the same purpose. And, on Monday, his Treasury Secretary Steven Mnuchin made vague comments about letting Iranian crude reach U.S. refineries.
Maybe it’s a cynical view, but an observer might conclude that politicians were simply trying to keep a lid on gasoline prices during the summer driving season.
But now that they’ve managed to push oil lower, investors may refocus on the positives. The main issues for commodity watchers have been the strong economy and relative lack of excess capacity — especially amid issues in Venezuela and Libya. Then you have the White House’s decision in May to reimpose sanctions on Iran, which removes supply from the market.
The middle eastern country may be another catalyst today because Tehran just announced progress on nuclear centrifuges. That’s exactly the kind of news that may aggravate the U.S. Administration. (So far, there seems to be no response from Washington.)
In conclusion, this isn’t a recommendation and everyone needs to do their own homework. But crude oil’s been on the rising for legitimate reasons, and now be stabilizing at a level where trend followers could take interest.