Oil Traders Cut Longs

The latest CFTC institutional positioning report shows that WTI traders cut their longs last week by 2,873 contracts taking the total position to 511,840 contracts. This latest reduction in upside exposure came amidst an uptick in the US Dollar as US yields continued to break out to their highest levels in over a year.

Correction Finds Support

Despite the reduction in longs and the correction lower we saw last week, crude prices failed to break to the downside. The sell-off found support into the recent lows and price has since bounced with oil now turning higher once again, in line with the recent bull trend. However, for now, the rally has lost a bit of momentum. With the broader risk complex looking a little softer this week, energy traders are awaiting fresh upside catalysts.

Middle East Tensions on Watch

One issue that energy traders have been noting with caution this week is the situation in the Middle East. Following the US airstrikes on Syrian targets, US airbases have been targeted in Iraq. With tensions rising, the hostilities are likely to keep oil prices underpinned as we typically see during any flaring up of tensions in the region.

EIA Reports Huge Inventories Build

In the US, the EIA reported an extremely large build up in crude inventories last week as a result of freak weather storm in Texas. The EIA saw stockpiles rising by over 21 million barrels in the week to February 26th. This was wildly higher than the 1.2 million drawdown estimated. However, despite the huge surplus in headline crude inventories, oil prices took some support from news that gasoline stocks fell 12 million barrels over the week, marking the first drawdown in months.

OPEC+ To Rollover Cuts

Looking ahead, there is market chatter that OPEC+ will extend its current production cuts when it meets today. There had been speculation that the cartel plus non-OPEC nations led by Russia might look to capitalise on higher oil prices by increasing supply. However, Reuters and Bloomberg have been reporting sources saying that cuts will be rolled over for a final month, which should keep price underpinned in the near term.

Technical Views

WTI

The recent correction in oil prices found support on approach to the 58.48 level, with price now attempting to get back above the 61.50 mark. While price holds above 58.48, the bis remains geared towards higher prices in the near term. Below there, the trend lien retest and support at 54.82 will be the next zone to watch.

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