Oil Traders Increase Longs
The latest CFTC COT institutional positioning report shows that oil traders increased their net long positions by a further 6,469 contracts. This latest increase takes total upside exposure back up to 404,776 contracts; a two month high. The uptick in bullish bets is well reflected in price action as oil prices continue to grind higher amidst the ongoing energy crisis and supply chain issues driving the price rally.
Crude Rallies 15% in October
Crude oil prices are now up 15% alone as the energy crisis continues to unfold. The spike higher in natural gas is also contributing to the oil rally as users switch between the two fuels as a result of the bubble in gas prices. Global authorities have yet to determine when the current energy crisis is likely to end with a lack of wind over the last year being named as an additional cause of the spike higher in natural gas prices.
Demand Outweighing Supply
The rally in oil prices has seen many major players adjusting their price guidance for the year with some now projecting that crude will hit as high as $90 per barrel. OPEC has so far not made the decision to increase oil production which is also allowing the rally to continue. For now, the oil producing cartel and a group of non-OPEC producers, led by Russia, remains committed to maintaining a gradual increase in oil production.
EIA Reports Further Inventories Draw
The latest report from the Energy Information Administration also gave bulls further reason to buy. The EIA reported that US commercial crude stores dipped by 431k barrel last week. This was in stark contrast to the 1.93 million barrel rise the market was looking for. The report itself highlights that supply is tightening somewhat at a time when demand is soaring, further contributing the rally being seen in crude prices. Gasoline inventories also fell last week and are now sitting at 217.7 million barrels in total; their lowest level since Q4 2019.
Technical Views
Crude Oil
Crude is now testing the top of the bullish channel following a steep rally over the last 6 week, underpinned by a local rising trend line. The move into the current 83.75 highs, however, has seen some bearish momentum creeping in on the MACD, suggesting potential for a near term correction. However, while the 76.78 level holds as support, any move lower is likely to provide a further opportunity for medium term buying as the focus remains on further upside for now.
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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.