Oil Traders Raise Upside Bets Again
The latest CFTC COT institutional positioning report from the shows that oil traders increased their net long positions last week. Total upside exposure jumped from 325k positions to 334k positions. This marks the third consecutive weekly gain in oil prices. Despite the increase in upside bets, however, crude oil prices have fallen back sharply this week from the highs initially seen in response to the announced EU ban on Russian oil.
EU - Russia Oil Ban Impact
The week started with a sharp, knee-jerk rally in oil as news broke of the partial EU ban on Russian oil. EU leaders agreed a ban on all seaborne oil coming into the EU from Russia, accounting for around 65% of imports. Additionally, pipeline oil imports will also be scaled back into the year end, to cover around 90% of total Russian oil imports to the EU. A 10% exemption will remain in place for oil reaching countries such as Hungary and Slovakia by pipeline.
While oil markets initially rose on the news, the gains were short-lived. Industry data shows that Russia has already been diverting around 2 million barrels per day of the 6 million barrels it will lose in supply to the EU. Additionally, Russian ahs vowed to make up the shortfall elsewhere, with China and India said to be looking to step up purchases in order to help support Russia during its war effort against Ukraine.
OPEC To Ban Russia From OPEC+ ?
OPEC meets today for its latest monthly output-setting decision. The group is expected to stick to its gradual path of hiking by around 400k+ barrels per week, and so is unlikely to me a major market mover. However, there will be focus on whether the group makes the decision to ban Russia. OPEC is said to be considering such a move on the back of Russia continually undershooting supply quotas set by the OPEC+ agreement. In the event that Russia is banned, this will certainly add some more uncertainty to the supply outlook and might driver prices higher near term. However, the group’s de-facto leader, Saudi Arabia, along with the other larger producers would certainly step up production to cover the deficit.
EIA Expected to Record Large Drawdown
Finally, the latest Energy Information Administration report is due today. The weekly release was delayed due to the US holiday on Monday but is expected to show a drawdown of 3 million barrels last month which should help underpin crude prices somewhat if confirmed.
Technical Views
Crude Oil
Crude prices are currently reversing back under the 114.71 level following two days above the level earlier this week. While below here, and with MACD and RSI turning lower, the focus is on a test of the 108.74 support, along with rising trend line. While this region holds, the broader outlook remains bullish with only a break of that level shifting the narrative.
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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.