Oil Traders Increase Longs
The latest CFTC COT institutional report shows that institutional traders increased their net long positions in crude by 13,547 contracts last week, taking the total position to 523,956 contracts. With this latest increase, crude upside positions are now sitting at their highest level in five months. The increase reflects the ongoing lift in sentiment in fuel markets as global reopening optimism continues to lift oil demand.
Oil Jumps in June
Oil prices have risen over 12% in June alone as a function of the upgraded demand outlook for crude. With the US continuing along the reopening path and conditions improving elsewhere, it seems that the major target for the oil market is the return of broader, global travel. Although the emergence of the delta variant is causing some concern, it seems that most players are anticipating a pickup in demand from the crucial aviation sector over the coming months, particularly in Europe for the summer tourist season.
OPEC Raises Price Targets
The strength in oil markets has so far been undeterred by the resurgence in the US Dollar over the last week. Indeed, with Dollar now having conceded some of its post-FOMC gains, the path looks clear for higher prices in oil. OPEC has recently upgraded its price targets for the year ahead, in line with upward revisions to its demand outlook as a result of improving global conditions. OPEC judges that the build in supply that occurred over the height of the pandemic has now mostly been worked off and the oil market is now tightening as demand increases in key economies.
EIA Reports Further Inventories Draw
The Energy Information Administration had yet further good news for oil bulls this week. On the back of three consecutive weeks of large-scale inventories drawdowns, the EIA reported a further drawdown last week of more than 7 million barrels. The 7.6 million barrel decline over the week, was deeper than the 6.3 million barrel decline the market was looking for and confirms the improving demand landscape in the US.
The rally in crude prices has seen price trading up to test the 74.46 level resistance, which continues to hold for now. In light of the long term trend, and while within the bull channel, the focus is on further upside in the near term. However, the bearish divergence in both RSI and MACD suggests room for correction. 69.53 is the key downside support to note.