The Crude Chronicles – Episode 30

Trading Tips

WTI long Positions Reduced Again

The CFTC COT positioning report showed that net long positions in WTI crude dropped by 972 contracts last week to 387,397 contracts in total. The move was the result of a 24,635 contract short position which overtook the 23,663 contract long position.

WTI prices have seen a steady cascade lower over recent weeks as the collapse in risk sentiment has pulled prices lower. With massive travel restrictions in place across the globe, demand from the aviation sector has been dramatically reduced. Many airlines are running heavily educed services with many countries banning air travel in the near term. So far, the US, China, Spain, Italy and France have all announced travel restrictions. The EU as a whole has now announced travel restrictions while the UK government has advised citizens not to travel by air for up to 30 days.

Drop in Airline Demand Hurting Oil

The drop in airline demand has accented the massive reduction in demand from the industrial sector, specifically from China which accounts for the majority of oil demand globally. With Chinese manufacturing having fallen to record lows over last month, the loss of activity there is having damaging consequences for the price of oil.

There had been hopes earlier in the month that OPEC would be able to help lift oil prices as it announced plans for deeper restrictions on oil production. However, with Russia refusing to join the agreement, the plan has since fallen through and oil prices continue to free fall.

EIA Reports Further Inventories Build

The latest EIA report was just the latest set of bad news for the oil market this week as the association reported a further build in US WTI levels last week. The ongoing build in US WTI levels reflects the growing demand concerns which are weakening oil prices. Efforts from central banks to help support economies and asset prices have so far failed to gain traction and in the near term, the projected price path for WTI remains tilted lower from here.

Technical Views

WTI (Bearish below $ 26)

From a technical viewpoint. WTI prices have moved ferociously lower again this week, breaking down further below the yearly S1 left all the way back up at $ 48.25. With VWAP firmly negative, further downside looks likely here. Price has broken down below the $ 26 lows and is now close to testing the $ 17.10 level ahead of the $ 10.70 support. This is a major long term level for WTI and will be closely watched.

The Crude Chronicles - Episode 30

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