A key metric we are watching is the slowing of U.S. crude oil production growth in the face of negativity about global recession and the potential slowing of global oil demand growth. Look at these charts to support this trend.
The first chart depicts the year-over-year change (red line) in U.S. crude oil production, along with the number of drilling rigs deployed to the U.S. oil sector (blue line). Both lines trend downward.
OPEC and its accord partners are looking favorably at a down trend shown in the chart. The United States has been a major disruptor in the global flow of oil and slowing of U.S. production supports the OPEC cause.
This supports medium term bullish inclination, but combined inventories of U.S. crude and petroleum products remain well above the five-year average. The building pattern since mid-March is reflected in the second chart.
The oil complex is not likely to enter a sustained price move to the upside until inventories move to a destocking pattern.
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