Crude Traders Cut Longs
The latest CFTC COT institutional positioning report shows that oil traders cut their net-long positions last week by more than 30k contracts. This latest reduction in upside exposure brings the total bullish position down to 374,313, marking a two-year low. The reduction comes amidst ongoing concerns over the rise in Delta variant cases, amongst others being identified globally. COVID fears are once again resurfacing as the Western hemisphere moves through the summer and faces the prospect of greater outbreaks once again as the weather cools.
EIA Reports Further Drawdown
Despite the reduction in upside bets, crude prices have been broadly higher over recent weeks, marking a firm rebound off the 61.80s lows printed in August. The Energy Information Administration certainly had good news for bulls this week. The EIA reported a further, large drawdown in commercial inventories. Stockpiles fell by more than 7 million barrels last month, a far deeper drag than the 3 million barrel surplus the market was looking for.
Record US Oil Demand
Alongside this, the group reported total-products supplied of 22.8 million barrels per day over the week. This reading is used as a gauge for total fuel demand and marks a fresh, all-time high, reflecting the ongoing pickup in demand in the US. Indeed, demand has been so strong that even with US oil production hitting its highest level since May 2020 at 11.5 million barrels per day, the market was still in drawdown.
OPEC Revise Demand Outlook Higher
The OPEC meeting this week offered further support for bulls. The group, along with allied non-OPEC nations led by Russia, agreed to maintain a steady increase in production of just 400k barrels per day, avoiding the calls from some members to increase at a faster rate. Additionally, the group now sees 2022 demand as higher than originally projected despite ongoing uncertainty around the pandemic.
Technical Views
Crude Oil
For now, crude prices remain capped by the 69.53 level, just ahead of the upper trend line of the corrective bear channel which has framed the sell off from YTD highs. With indicators turned higher here, a break above this level (and the channel top) will put the focus on the 74.46 level next.
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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.