Oil Traders Cut Longs
The latest CFTC COT institutional positioning report shows that oil traders trimmed their net long positions last week by a further 25,139 contracts, taking the total position back down to 497,351 contracts. The reduction in upside exposure came amidst a tense OPEC+ meeting which was marred by disputes between Saudi Arabia and UAE producers.
OPEC+ Fighting For A Compromise
OPEC and allied non-OPEC producers led by Russia were meeting to agree upon the next easing of production restrictions. However, with UAE producers calling for production to be stepped up at a greater pace than other OPEC members were comfortable with, the talks ran into difficulty and were ultimately extended by a further week. The two sides are now close to a compromise with an increase of around 400,000 bpd on the table, though OPEC has yet to confirm the move.
USD Creating Issues
Oil prices have lost upside momentum over recent weeks as a result of the tensions within OPEC+ and also with the US Dollar gaining ground again. The rally in the greenback over the last month has seen the broader commodities complex coming under pressure and while the Fed is determined in its efforts to continue downplaying tapering expectations, the market appears merely to be waiting on a chance to buy USD, meaning that oil prices could face further headwinds from here.
Conflicted COVID Impact
The COVID backdrop remains a conflicted catalyst for oil prices. On the one hand, vaccination success and ongoing reopening underway across key economies is helping lift the demand outlook. However, the rise of new variants is raising concerns over the stability of the current reopenings underway and is threatening the wider return of the travel and tourism sector this year, meaning that oil might not see the surge in demand from the aviation sector that many forecasts earlier in the year.
EIA Reports Further Crude Draw
The latest report from the EIA this week showed that crude oil stockpiles in the US fell for an 8th consecutive week last week. Commercial inventories dipped by 8 million barrels, almost double the 4.4 million barrel decline forecast, once again highlighting the pickup in demand in the US. The data showed that refiners have been working through inventories in the longest consecutive run since January 2018 to meet the rising demand as the economic recovery continues to motor ahead.
Technical Views
Crude Oil
Crude prices failed once again at the 74.46 level, putting in a lower high against the initial peak. With MACD bearish and the RSI turning lower, there is room for a deeper correction here. To the downside, the key levels to watch are the 69.53 support, with the rising channel low coming in just beneath, and the 65.52 level deeper still.
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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.