Crude Traders Increase Longs
The latest CFTC COT institutional positioning report shows that oil traders increased their net long positions last week by a further 19,202 contracts. This latest increase takes the total position to 510,499 contracts, marking fresh multi-year highs in upside exposure. The increase comes amidst the building optimism over the reopening underway across many key economies, which is fuelling an improved demand outlook for oil.
Unmoved By Strong USD
Indeed, the current upside position in oil is so strong currently that even the seismic shift in the Dollar this week appears not to have shaken crude bulls. The greenback surged higher yesterday in response to the June FOMC. While no changes in monetary policy were made, the Fed’s dot plot forecast was revised significantly higher with 13 of the bank’s policymakers now projecting a rate hike as early as 2023, up from 7 in March.
Crude prices have been increasing steadily over recent months as the market recalibrates in light of the economic recovery underway across most developed economies. The start of the summer driving season in the US and hopes for a summer tourist season in the UK and Europe are helping keep oil prices underpinned here.
EIA Reports Further Inventories Draw
The latest release from the Energy Information Administration in the US has offered further support for crude bulls this week. The EIA reported a more than 7-million-barrel drawdown over the last week, marking the fourth consecutive week of narrowing surpluses.
In terms of gauging overall demand in the US fuel market, the EIA reported that the total products supplied figure (often used as a gauge for demand) was seen rising to 20.6 million barrels with the four-week average now sitting at 19.3 million barrels. The last time this figure was this high was in 2019.
Looking ahead, there is still plenty of uncertainty in the outlook and obvious downside risks remain. However, if countries can continue along the path to reopening without any severe further outbreaks of the virus, leading to travel restrictions, then this should keep oil prices well supported in the near term.
Technical Views
Oil
The rally in crude this week has seen price breaking out further above the 69.53 level, stopping just short of a test of the 74.46 highs. With both MACD and RSI positive here, the focus is on further upside while price holds above the 69.53 level. Below there, 65.53 is the next support to watch, along with the rising channel base.
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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.