Oil Traders Cut Longs
Thelatest CFTC COT institutional positioning report shows that oil traders marginallyreduced their upside exposure in oil last week. This might seem a littlesurprising given then large topside moves we’ve seen. Oil longs were cut backto around 60% of their maximum position despite the strong rally we’ve seenover the last week which has taken oil back up to its highest level since 2008.Crude prices are now almost 60% higher over the year so far and show littlesign of slowing down.
Ukraine War Driving Oil Higher
Thekey element driving the current rally in oil is the impact of the conflictbetween Russia and Ukraine. Given the wide raft of sanctions placed on Russiaby global governments and the decision by many major corporates to abandonpositions in Russia and cut ties with partners, there has already been a hugeimpact on oil. Supply. Given the Russia is the second largest exporter of oil,the consequences of its invasion of Ukraine, and the subsequent fall out, havebeen significant.
Sanctions Impact
Withthe reality of a protracted conflict now settling in, the West is also mulling furthersanctions on Russia, such as sanctions on energy exports. However, while thiswould certainly hurt Russia’s economy it would also further exacerbate thedamaging inflationary spiral that many countries around the globe arestruggling with. Regardless of sanctions, it seems that many countries andcorporates are steering clear of Russian oil anyway, either out of protest anddisgust at Putin’s move, or fear of running into sanctions.
IEA Oil Release
TheUS and other countries within the IEA announced this week that they wouldemploy a strategic release of oil reserves in a bid to help bring prices lower.However, against the backdrop of the war in Ukraine, this did little to curtailthe rally in crude. OPEC+ once again resisted calls this week to increase oilproduction at a faster pace, sticking to just 400k barrels per day for April, likelyto keep oil prices supported near term.
EIA Reports Drawdown
Thelatest report from the EIA shows that US crude stores fell by 2.6 millionbarrels last week. This was in stark contrast to the 2.7 million barrelincrease forecasted. The US strategic oil reserve was seen falling to itslowest level since 2002, of 580 million barrels. This preceded the announcementthat the US and IEA will release around 60 million barrels in SPR over the comingmonths.
TechnicalViews
CrudeOil
Therally in crude oil this week has seen the market advancing firmly above the brokenbull channel and the key $100 mark. Price is now testing the $114.71 level and,with both MACD and RSI bullish, the focus is on a further push higher. Whilethe $95.93 area holds as support, $121.56 is the next topside marker to watch.
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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.