Oil Traders Cut Longs Further
The latest CFTC COT institutional positioning report shows that oil traders continued to reduce their net long positions last week as profit taking develops further. Crude prices had surged to fresh two-month highs just a few weeks ago but are now well off these levels and are down by around 200k lots from the record highs seen during the summer in 2021. The reduction in upside positioning has seen price coming off a little from the highs seen last week though, the market remains well supported with the current downside little more than a minor correction to the recent rally.
US - Iran Talks on Watch
Oil prices have come under pressure this week over news of talks between the US and Iran aimed at reinstalling the 2015 nuclear deal and removing sanctions applied to Iran. The removal of these sanctions would include allowing Iran to export oil and is aimed at helping alleviate the supply side issues which have been contributing to soaring energy prices. For now, no deal has been agreed though should an agreement be achieved, this would likely result in downside pressure on oil in the near term. On the other hand, should the talks fall through and no deal be agreed, this would likely provide a catalyst for near term upside in oil prices.
Biden Speaks With Saudi King
The US has also been engaged in talks with other key producers. Biden spoke with Saudi King Salman yesterday regarding energy supplies and the price crisis. The US has been calling for OPEC+ to step up production at a faster pace in a bid to bring prices down though OPEC+ has so far refused, sticking to its strategy of gradual increases.
Record US Oil Demand
Despite the sell-off, crude prices found support into the lows yesterday on the latest report from the Energy Information Administration. The EIA reported that US commercial crude stores tanked by almost 5 million barrels last week, in stark contrast to forecasts for a 400k barrel increase. This massive drop in stocks comes as demand hits record highs in the US, a strong indication of the pace of the economic recovery, with manufacturers struggling to keep up with output.
Technical Views
Crude Oil
The rally in crude prices has stalled for now into a test of the bull channel top, with the market dipping back below the 90.85 level. Momentum indicators have been flagging bearish divergence on this recent ascent, suggesting room for some correction near term. However, the outlook remains bullish while prices holds above the 83.75 level with 95.93 the next topside level to note.
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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.