Crude Traders Increase Longs

The latest COT institutional positioning report from the COT shows that crude oil traders increased their net long positions last week by a further 9,068 contracts, taking the total position to 527,717 contracts. With this latest increase in upside exposure, crude oil longs are now at their highest level in six months. The increased bullish positioning reflects the better sentiment that has taken hold of the crude market over recent weeks.

OPEC Holds Production Steady

Crude oil prices have been bolstered recently by news that OPEC+ will not be easing out of production restrictions just yet. The group's de-facto leader Saudi Arabia has also said that it will cut production by 1 million barrels per day. The group cited concerns over the demand outlook for the reasoning behind the move as cartel nations keep a close eye on the path of the pandemic.

Weak US Dollar Helping

The US Dollar has come back under pressure this week, which is also helping keep oil prices supported. The Dollar has been sold in the wake of Joe Biden being sworn in as the new US president. With expectations of large stimulus to come, the Dollar has found fresh selling interest as equities markets soar to fresh highs. The lift in risk appetite is another upside catalyst for crude prices.

Further EIA Drawdown Forecast

The weekly EIA report has been delayed this week due to the closure of federal government on Wednesday for Biden's inauguration. The report will instead be released later today and is expected to show a further decline in headline crude inventories which should provide oil traders with enough reasons to stay long into the weekend.

COVID Risks remain

The main downside threat to oil currently, remains the COVID backdrop. With global cases and deaths still soaring, the risk of current lockdowns around various parts of the globe being extended throughout Easter looks increasingly likely. This will mean another big blow for the aviation sector, shattering demand for oil in that space, which could start to drag oil prices lower once again.

Technical Views

WTI

The rally in oil prices has seen the market breaking out above the 50.32 level in recent weeks. Price has now paused just ahead of testing the 54.82 level and the bearish trend line from 2018 highs. This is a key area to watch and a break above this zone will be a firm bullish signal for oil. To the downside, any move back below the 50.32 level will see the 43.96 support back on the radar.

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