Oil Traders Increase Longs
The latest CFTC institutional positioning report shows that crude traders increased their net long positions last week by 4k contracts, taking the total upside position back up to 404k contracts. With this latest increase, crude upside bets are back up off their lowest levels since February last year. The increase reflects the pick up in risk appetite across the last week or so, despite rising concerns over the Delta variant surge which is hampering the global outlook once again.
Weak Dollar Lifts Oil
Crude oil prices have been firmly higher this week with the market recovering off the 61.80 lows to trade back up to around the 68.12 level as of writing. The move has been helped in part by the weakness in the US Dollar this week. The greenback has come under pressure amidst weakening expectations that Fed chair Powell will give any hawkish tapering signals at the Jackson Hole event tomorrow. Ongoing uncertainty around the pandemic is expected to weigh on Powell’s comments. Should USD come off on the back of any market disappointment tomorrow, this is likely to create room for a further rally higher in oil.
EIA Reports Further Inventories Decline
Oil prices have been helped higher this week by a further bullish report from the Energy Information Administration. The EIA reported that US commercial crude inventories last week fell by a further 2.9 million barrels. This was deeper than the 2.6 million barrel sell off the market was looking for and comes on the back of the prior week’s 3.2 million barrel decline.
The latest string of reports from the EIA have highlighted a trend of growing demand for oil products, as reflected in the ongoing drawdowns seen. Notably, gasoline inventories were also lower over the week, falling by 2.2 million barrels. This was again deeper than the 1.6 million barrel decline the market was looking for.
Uncertainty Ahead
Looking ahead, the outlook for oil prices appears highly linked to USD flows and the developments within the COVID backdrop. Flare-ups in COVID fears have the potential to impact oil prices lower. However, if global data continues to strengthen, this should help keep oil prices supported on better demand expectations. As for the Dollar, traders must now wait and see what Powell brings tomorrow.
Technical Views
Crude Oil
The rally in oil prices this week has seen the market moving back above the 65.52 level. With both the RSI and MACD turning firmly higher here, there is room for further upside though bulls will need to see a clean break of 69.53 in the short term, putting the focus back on a retest of the broken bull channel.
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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.