Oil Traders Increase Longs

The latest CFTC COT institutional positioning report shows that WTI traders increased their net longs sharply last week. Upside exposure grew by 21,708 contracts over the week, taking the total position to 463,538 contracts. Net longs are now back up at a three week high reflecting the more encouraging risk backdrop in response to positive news around COVID vaccine development.

Over the last two weeks, four different companies have announced clinically effective COVID vaccines. Pfizer and its partner BioNTech, Sputnik, Moderna and now AstraZeneca, have each announced vaccines that have shown to be more than 90% effective in large-scale clinical trials. The vaccines are currently going through the regulatory process with hopes that the drugs will start to be rolled out in the US and Europe ahead of the end of the year.

Global COVID Cases Still Rising

The news comes as global COVID infections and deaths continue to soar. Many countries in Europe have returned to nationwide lockdown with expectations that lockdown restrictions will need to continue across the coming winter months (to a varying degree) until such time as the vaccines have been rolled out properly and are delivering immunity on a large scale.

WTI prices have been higher across the week in response to the better risk outlook as a result of the vaccine announcements.

Continued weakness in the US Dollar is also providing upward support for WTI prices this week. The Dollar continues to languish in the aftermath of the US elections. Despite much furore around Trump refusing to concede the presidency, the elections have been called in Biden’s favour by a number of mainstream media outlets and polls and the market is now looking ahead to the economic prospects under a Biden-led, divided government.

EIA Reports Less-Than-Expected Inventories Build

In its latest weekly update released yesterday, the Energy Information Administration reported US WTI inventories had risen by 800k barrels last week. However, given that this was less than half the expected 1700k barrel increase, it has done little to dent the upside move in crude prices this week. Inventories have seen large drawdowns over recent weeks suggesting that demand continues to firm up despite the uptick in COVID cases. As yet, there has been no further nationwide lockdown in the US.

Technical Views

WTI

Following the firm rebound off the latest test of the 35.79 region support, crude prices have traded back up to the 41.35 level and are holding just above the level for now. While price sits atop this level, the bias is skewed towards further higher prices with the 50.32 level the next objective for bulls.

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