Crude oil: Bullish outlook, US stocks with scope to hit multi-year lows – Rabobank

Analysts at Rabobank argued that Brent crude oil is now back above the key psychological $60/bbl level and both Brent and WTI are trading above their respective 20-day moving averages. They see a high probability of further draws to US crude stocks in the weeks ahead that will result in US inventories reaching multi-year lows. 

Key Quotes: 

“It was a volatile week for the petroleum complex with oil prices rallying sharply midweek before fading back late Thursday afternoon and into Friday morning. The market did manage to make some technical improvements on the week despite the choppy price action. As it stands - Brent crude oil is now back above the key psychological $60/bbl level and both Brent and WTI are trading above their respective 20-day moving averages.”

“In fact, Brent made a new 20-day high on Thursday at $62.40 and WTI at $57.76/bbl. 

“The new highs came on the back of bullish inventory data as well as a marked improvement in overall sentiment given the progress in the US-China talks with both sides agreeing to meet in early October. As for the inventory data - the US Department of Energy report showed impressive across the board draws to all the major product categories on Thursday. Crude stocks in the US dropped by - 4.771mb with Cushing stocks declining by -230kb. Stocks of refined products also moved lower with gasoline inventories dropping by -2.396mb and distillate stocks falling by -2.538mb. We see a high probability of further draws to US crude stocks in the weeks ahead as exports of US light crude increase into year end. As a result – we expect to see US crude inventories reach multi-year lows which should lend good support to flat price, curve structure, and speculative positioning.”

“Looking forward we maintain our bullish oil market outlook and are encouraged by this week's price action and fundamental data. We see scope for US crude stocks to hit multi-year lows in the weeks ahead which combined with an improving macro outlook should support crude prices.”