Oil Traders Increase Longs
The latest CFTC COT institutional positioning report shows that oil traders increased their net longs last week by a further 2k contracts. This latest increase takes the total long position back up to 421.3k contracts. Despite the uptick in institutional positioning, oil prices have been lower over the last week as the resurgence in the US Dollar takes its toll on commodities and the risk complex in general.
Stronger USD Weighs On Oil Prices
A much-stronger-than-expected set of US inflation figures for October, followed by a better-than-expected set of retail sales figures, has once again turned the focus to Fed tightening expectations. While the Fed announced earlier this month that it would be following a slow and steady path of tightening with rates unlikely to move until later next year, better data has increased expectations that the Fed will be forced to speed up its tightening operation. The US Dollar has been firmly higher consequently and looks set to continue higher into the next Fed meeting in December where the market is expecting a fresh announcement.
Energy Crisis Impact
In terms of the broader backdrop, the energy crisis of recent months is continuing to unfold and shows no signs yet of abating. As inflation figures around the world continue to soar as a result, there is increasing pressure on central banks to adjust policy in response. There have also been growing calls for OPEC to step up its oil production in a bid to quell rising prices, though OPEC has so far withstood this pressure to maintain production at current levels. Indeed, OPEC itself has warned that the market is heading into a supply surplus over the next month with prices expected to begin falling as a result, justifying its decision to refrain from stepping up production at this point.
EIA Reports Further Inventories Drawdown
The latest report from the Energy Information Administration this week had good news for bulls, though was unable to inspire much of a rally. The EIA reported that US commercial crude stores fell by 2.1 million barrels last week, in stark contrast to the 1 million barrel surplus the market was looking for. The report highlights that domestic demand remains strong in the US, despite higher fuel prices. Gasoline stores were also lower the week by almost 1 million barrels along with a similar fall in distillate stockpiles.
Technical Views
Crude Oil
The recent failure at the 83.75 level has seen price correction lower with the market taking out the prior November low yesterday. With both MACD and RSI bearish, the focus is on a continuation lower with a break of the 67.78 support turning focus to 74.46 next and the channel low beneath it.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.