The Crude Chronicles – Episode 52

The Crude Chronicles

Oil Longs Reduced

The CFTC COT institutional positioning report shows that WTI traders paired some of their long positions last week. Oil traders reduced their net long exposure by 15,331 contracts last week, taking the total position to 520.935 contracts. This reduction in upside positioning likely reflects some trepidation in the market ahead of the OPEC+ meeting which took place this week.  There had been reports that OPEC+ would look to ease out of production restrictions this month, raising concerns over the potential for renewed supply and demand imbalances given the uncertainty around the pandemic and its implications for oil demand.

OPEC+ Calls for Continued Adherence To Cuts

However, at the OPEC+ meeting, no such easing of measures was announced and instead, a fresh call was made for complying with the cuts with the group’s de-facto leader, Saudi Arabia, calling for further cuts over August and September. OPEC+ now forecasts that the recovery in oil demand, while slow, could reach pre-virus levels by the end of the year provided that the group can continue to support the recovery by adhering to production restrictions.

The meeting has allayed bulls’ fears of a surge in supply, keeping attention on the health of the post-lockdown recovery. Oil prices have been largely subdued over recent weeks as the market remains caught between the upward pressure of a heavily weaker Dollar and the downward pressure of rising fears that a second wave of the COVID-19 virus is developing.

EIA Reports Continued Inventories Drawdown

The latest weekly update from the EIA this week has also helped keep oil prices supported. The EIA confirmed a further reduction in US WTI levels last week, marking the fourth consecutive weekly drawdown. Crude levels fell by 1.6 million barrels over the week with gasoline inventories declining also. While the data is encouraging, the summer driving season in the US is now close to ending and there are concerns that fuel demand has not picked up enough. With local lockdowns in force in some US states and the potential for further such measures, the near-term outlook remains uncertain.

Technical Views

WTI (Bullish above $41.35)

From a technical viewpoint. WTI prices continue to drift higher here despite bullish momentum having largely faded, reflected by the continued bearish divergence in momentum studies. Price is now sitting above the $41.35 level and while above here, the near-term bias remains bullish with $50.32 the next target. To the downside, any break below the $41.35 level will bring the $29.14 level back into view as the next main support.

The Crude Chroncicles - Episode 52

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Share this post:

Credit: Tickmill

Leave A Comment

Your email address will not be published. Required fields are marked *