Oil Traders Cut Longs Again
The latest CFTC COT institutional positioning report shows that oil traders reduced their net long positions again last week. The latest data reflects a move down to 268k contracts from 280k contracts prior and marks the seventh straight week of reductions in upside bets. The total long position has shifted from 334k contracts on May 27th to the current level, showing an overall reduction of roughly 20% in that timeframe.
Higher USD Weighing on Oil
Oil prices have been coming off steadily in recent weeks due a number of reasons. Firstly, the uptick in the US Dollar has taken a heavy toll on commodities prices generally, including oil. With the Fed having turned even more aggressively hawkish in recent month, highlighted by June’s .75% hike, the US Dollar has been on a heady run higher. With traders bracing for the prospect of an even larger hike this month, the US Dollar is continuing to subdue oil prices.
Recession Fears
Along with the rise in the US Dollar, oil prices have also come under pressure from increasing recession fears. With inflation running riot globally and central banks in a race to tighten at a faster pace, many forecasters are warning of dark clouds on the horizon. We’ve heard many central bank heads warning that a slow down is likely coming over the remainder of the year and with the expectation that such conditions will damage oil demand, prices have been coming off.
OPEC Ups Production
Worth remembering also that OPEC has heavily stepped up supply over the summer period. The oil producing cartel agreed to lift output from around 400k barrels to 650k additional barrels up to September. This additional supply has entered the market at a time when demand concerns are emerging, further weighing on sentiment.
Muted Reaction to EIA Release
The latest data from the EIA this week did little to help oil bulls. The group posted a -0.4 million inventories reading. However, on the back of the heavy surplus the prior week, the data was unable to shift sentiment for crude prices which continue under pressure on Thursday. Furthermore, gasoline stocks were seen in a 3.5 million barrels surplus, reflecting weak demand during the typically high-demand summer driving season.
Technical Views
Crude
Following the breakdown through the rising trend line from yearly lows, crude prices have been trending lower within a narrow bear channel. Price is currently sitting on support at the 95.93 level which has underpinned the market recently. However, with both MACD and RSI bearish, the focus is on an eventual break lower and a move down towards the 83.75 level next.
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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.