Time for optimism?
WTI crude oil is back above $65/barrel in a sharp turn after hitting a three-month low of $61.74 earlier today.
The nearly 5% rally puts a bullish outside day on the chart.
RBC was out with a bullish note yesterday arguing that the drop in prices isn’t matched by what’s happening in the physical market.
“The financial market rout is moving at an asymmetric downward pace to what hte physical market is telling us,” they wrote.
They highlighted that Chinese demand worries may be overstated and that India demand is crowing. Moreover, US mobility hasn’t declined during the recent delta wave. Finally, European hotel bookings were rising and up to 70% of pre-covid levels.
Here’s a CIBC chart showing US oil inventories trending below the 5-year average. Notably though, inventories have flattened out at a time of year when they’re generally drawing.