Oil Traders Increase Longs

The latest CFTC COT institutional positioning report shows that oil traders added to their net long positions last week by 1k contracts. This recent increase in upside exposure brings the total long position back up off multi-year lows to 355,978 contracts. The upgrade in positioning comes amidst a strong rally in oil prices. The surge in prices in the broader energy complex is lifting oil prices here as supply chain issues around the globe drive higher prices. The increase in prices comes at a time when demand is increasing as countries continue to recover from the pandemic, deepening the supply chain issues which then feed back into higher prices.

In the UK, the supply chain issues have resulted in chaos with the government confirming that the Army will be brought in to distribute oil due to a shortage in lorry drivers. There have been similar supply chain issues throughout Europe with COVID disruptions, as well as regulatory changes since Brexit, causing the issues.

Oil Hits Multi-Year Highs

This week the price of crude oil surged above $80 per barrel for the first time in over three years. Many key players are now upgrading their end of year price forecasts for oil as a result of the energy crisis in Europe and the rising global demand. Despite the move higher, oil prices ran into selling pressure as they passed the big psychological, retreating somewhat yesterday. The resurgence in the US Dollar is also helping cap the oil rally here though, looking ahead, the focus is on continued upside in the near term with the energy crisis in Europe set to persist over the coming months.

EIA Reports Unexpected Inventories Build

Oil prices were also hit yesterday by the latest report from the Energy Information Administration. The EIA reported that US commercial inventories rose by 4.6 million barrels last week, the largest weekly increase in months. The move was in stark contrast to the 1.7 million barrel drop the market was looking for and reflects the uptick in supply as producers look to capitalise on surging demand and higher prices.

Technical Views

Crude Oil

The rally in crude oil this week has seen price trading back up to test the big resistance level at $76.78 and the underside of the broken bull channel low. The area is holding as resistance for now. However, with both MACD and RSI firmly bullish here and the 74.46 level holding as support, the focus is on a break out higher in the near term.