Oil Traders Increase Upside Bets
The latest CFTC COT institutional positioning report showed that crude traders increased their net ling positions in crude oil last week by a further 7,305k contracts, taking the total position to 499,983k contracts. This latest uptick in upside exposure came amidst the ongoing decline in the US Dollar which has helped keep oil prices supported recently. Price action this week has seen oil futures drifting higher, though still largely contained within the recent 57.24 – 65.52 range.
USD Remains Weak, Supporting Oil
This week, the upside in oil has once again mostly been a reflection of continued weakness in the US Dollar. The sell-off in the greenback was maintained this week with the Fed keeping rates on hold as expected. While the Fed sounded more upbeat on the economy, it maintained its message that any uptick in inflation will be due to transitory factors, maintaining the view that easing will need to remain in place across this year.
Global Risk Backdrop Supportive
In terms of the global risk backdrop, equities have remained mostly buoyant this week which has helped oil prices continue higher. With the focus still on the global vaccination effort and expectations of global re-opening, the demand outlook for oil still looks set to improve dramatically over the remainder of the year.
EIA Reports Less Than Expected Build
The rise in oil prices this week came despite the Energy Information Administration in the US reporting a build in crude stockpiles. Headline crude inventories were seen rising by 90k barrels last week, taking the total inventories position up to 493.1 million barrels.
However, given the expectations for a 659k barrel increase, this result did little to detract oil from its current rally. Similarly, gasoline inventories were seen rising by 92k barrels, but this was also well below the expected 508k barrel rise. Distillates were lower over the week, falling by 3.3 million barrels against an expected 648k barrel drop.
The rally in crude oil prices this week has seen the market rising back up to challenge the highs printed last week, which are holding as resistance for now, just ahead of the 65.52 level. The bounce off the 57.24 level is slowly drifting higher and, while price remains within the broad bullish-channel off 2020 lows, the outlook remains geared towards further upside. A break above the 65.52 level should target the 69.53 level next.
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