Oil Traders Increase Longs
The latest CFTC COT institutional positioning report shows that oil traders increased their net long positions last week by a further 2205 contracts. This latest increase takes the total position up to 526,161 contracts and comes amidst the ongoing improvement in the demand outlook for oil. With global reopening still the main focus, expectations of a continued lift in demand across the remainder of the year are helping oil prices continue higher.
EIA Reports Further Deep Drawdown
The latest weekly update from the Energy Information Administration is helping further endorse these expectations. The EIA reported a fifth consecutive weekly drawdown in commercial crude stocks last. Inventories held by refiners fell by more than 6 million barrels, far deeper than the drawdown the market was looking for.
Inventories have been falling steadily in the US as the vaccination and reopening programme underway there has helped demand recover firmly. Refiners noted a spike in activity over the week with crude runs jumping by almost 200k barrels per day, taking refinery utilisation rates back up to 92.9% of their total capacity. Despite the fall in headline crude stocks, gasoline inventories were seen rising again last week with inventories jumping 1.5 million barrels on the week, despite expectations for a 900k barrel drop.
OPEC+ Meeting in Focus
Looking ahead to the remainder of the week, the big focus for oil markets is the OPEC+ meeting later today. The group is meeting to discuss further easing of production restrictions in August in a bid to meet rising global demand. Currently the market is projecting an output increase of 550k barrels though, given the projected over demand of around 3 million barrels per day, such a decision would be unlikely to weigh on oil prices.
For now, given the longer-term trend and the latest set of EIA results, the focus is on further upside in the near term. However, today’s OPEC meeting needs to be monitored given the risks of any downside materialising on a greater than expected easing of supply restrictions.
Technical Views
Crude Oil
Crude oil prices are once again testing the 74.46 level resistance with the RSI and MACD turning higher. With the market still moving within a broad bullish channel, the focus is on further upside . Should we see any correction lower, the next support to note is down at the 69.53 level.
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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.