Oil Traders Increase Longs

The latest CFTC COT institutional positioning report shows that oil traders increased their net long positions last week by 1024 contracts. This latest increase takes the total position up to 449,764 contracts. Despite the uptick in bullish positioning, however, oil prices have been firmly lower over the last week with the market contracting from highs around the 74.46 level to current levels of 68.18, as of writing.

Delta Variant Fears Hit Oil Prices

The resurgence in COVID fears, over rising cases of the delta and beta variants, has had a dampening impact on risk appetite over recent trading. Specifically for oil, the impact on the global tourism outlook and demand across the aviation sector, is the main focus. With restrictions still in place between many countries, the European tourist season this summer has failed to deliver the results many were looking for and, with autumn and winter ahead, it seems unlikely that global travel will return in a full sense until next summer.

The World Health Organisation has called on vaccination booster jabs to be halted until at least the end of September in a bid to address the widening margin between vaccination numbers in rich countries and poor countries. With the delta variant spreading rapidly, the impact is being felt most in poorer countries and, even in advanced economies, within areas where there are lower than average vaccination rates.

EIA Reports Unexpected Inventories Build

Crude prices were also hit this week by a bearish report from the Energy Information Administration. The EIA reported that in the week ending July 31st, crude inventories increased by 3.6 million barrels. This marks an unexpected return to surplus for commercial stocks and came in stark in contrast to the -3.1 million barrel drawdown forecast.

Technical Views

Crude Oil

The recent failure at the 74.46 level now holds the risk of creating a lower-peak against the 76.78 level high. With price now challenging the rising channel low, there is a risk of a much deeper reversal in the near term if price breaks through the 65.52 level lows, turning focus to 60.55 next, in line with bearish MACD and RSI readings.