Oil Traders Cut Longs
The latest CFTC COT institutional positioning report shows that oil traders cut their net long positions in oil last week by 3671 contracts. This reduction brings the total upside exposure back down to 522,490 contracts. Despite the reduction in upside positioning, the market remains heavily long and has been for months now.
Demand Expectations Improving
Optimism around the global economic recovery and reopening underway in developed economies has helped lift oil sentiment over recent months. With the US and UK pushing ahead with their reopening schedules and global trade picking up, demand expectations for the oil market have improved considerably.
Looking ahead, demand is expected to improve further over the remainder of the year as the focus switches back to the global travel industry. While these are concerns over the rise of the delta variant, for now, expectations of a summer tourist season returning in Europe (to some extent) are having a positive impact here.
OPEC+ Meetings Fail To Deliver So Far
Despite the elevated upside positioning, oil prices have come under pressure this week with the market correcting lower. Oil prices have come under pressure this week amidst the ongoing tensions at the July OPEC+ meeting. OPEC+ and allied non-OPEC producers were meeting to discuss agreeing further scaling out of production restrictions. However, as yet there has been no agreement with talks failing once again amidst a dispute over the level at which production should be increased.
Saudi / UAE Rift Causing Supply Fears
The dispute between the group’s de-facto leader, Saudi Arabia, and UAE producers is causing concern among oil bulls over fears that a proper rift could see UAE producers breaking away and flooding the market. Producers in the region have stepped up their production capacity over the course of the pandemic and are calling for production to be stepped up at a faster pace while Saudi Arabia is focusing on a slow, steady increase. With an agreement still not established, talks will continue today and headlines around the talks will remain a key driver of price action in oil.
Crude oil prices have this week reversed from the 76.78 highs and are now trading back below the 74.46 level, fast approaching the 69.53 level support. With MACD and RSI bearish here, there is room for a further break lower should price move under 69.53, putting the focus on the rising channel support.