Oil Traders Cut Longs Further
The latest CFTC COT institutional positioning report shows that oil traders cut their net long positions again last week. Total upside exposure was reduced by a further 17,784 contracts, taking the total position down to just 356,528 contracts, its lowest level since before the pandemic began. The reduction in upside bets likely reflects the growing concerns over Delta and other variants such as Mu which are causing fresh disruption for domestic economies and the global economy as a whole. With the west moving through summer and into autumn, there are fears of fresh lockdowns and travel restrictions which would weigh heavily on oil demand.
Output Lost During US Hurricane
Despite the reduction In upside positioning, oil prices continue to hold up. The recent loss of production capacity in the US as a result of Hurricane Ida has been a large contributing factor. The gulf coast region of the US lost total output capabilities during the storm and around 80% of production sites remain offline still, nine days since the storm passed. The total output outage currently is around 1.4 million barrels per day with the market having lost around 18 million barrels so far.
Further EIA Drawdown Forecast
The latest report from the Energy Information Administration is due later today. The weekly report, which usually falls on a Wednesday, is delayed this week due to the Labor Day holiday in the US on Monday. Ahead of the report, the market is looking for a drawdown of 5.9 million barrels, on the back of the 7.2 million barrel drawdown seen a week prior. The EIA has been reporting a healthy string of inventories drawdowns of late, reflecting the better pick up in demand in the US, with gasoline and distillate stockpiles falling also. Earlier in the week, the API reported a crude inventories drawdown of 2.9 million barrels, encouraging the market ahead of the release today.
Technical Views
Crude Oil
Oil prices continue to hover around the 69.53 level, where the market has been capped by the bear channel resistance line over the last week following the rebound off the channel low. With both MACD and RSI bullish here, the focus is on a further push higher towards the 74.46 level next. To the downside, any correction lower will test the 65.52 level as first support.
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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.