Oil Traders Cut Longs Last Week
The latest CFTC COT institutional positioning report shows that crude traders reduced their net long positions again last week, by a further 20,614 contracts. With this decline, upside positioning has now fallen back to 475,947 contracts, marking a seven- month low. While crude prices slipped last week amidst this correction in positioning, price have since recovered this week with the crude market trading back up to just below the May high.
Risk Appetite Supportive
The current rebound in oil has been helped by the broader pickup in risk appetite over the last week, following the declines seen earlier in the month. With the US Dollar remaining near lows, risk assets have been given room to recover. Looking across the broader commodities complex, many tradable are sitting off highs. However, the risk tone this week has been much firmer, creating for support for oil.
Better Demand Outlook for Oil
In terms of the fundamental picture, with growing focus on the potential return of a summer tourist season (to some extent) in parts of the world, the demand outlook is looking better for oil over the coming months, which should help keep prices supported. Though travel restrictions and quarantine rules remain in place for some countries, parts of the eurozone are looking to welcome back tourists this summer which should be a big help for oil given the massive absence of demand from the aviation sector over the last year.
EIA Reports Crude Inventories Drawdown
The EIA also had some good news for oil bulls this week. On the back of recent surpluses, the EIA this week reported an unexpected drawdown in US crude inventories. Commercial stockpiles were seen lower by 1.7 million barrels over the week. This marked a sharp decline from the prior week’s 1-million-barrel build and was also deeper than the 1 million barrel decline forecast. The report also detailed a 1.7 million barrel decline in gasoline inventories and a 3 million barrel decline in distillates. Looking ahead, the summer driving season on the US is likely to see gasoline inventories dipping further, providing more support for crude prices.
Technical Views
Crude Oil
The rally in crude prices this week has seen the market breaking back into the bull channel and back above the 65.52 level. While above here, the focus is on a continued move higher towards the 69.53 level next, MACD and RSI are mostly flat for now though MACD is starting to flip positive, supporting the move.
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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.
Past performance is not indicative of future results.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.