Since the OPEC outcome, which on the whole had been a surprise, crude oil prices have remained relatively rangebound as the market battles the cross-currents of a stronger economic recovery with a resurgence of virus cases.
Crude Oil Prices Choppy
Going back to the OPEC decision, last week oil ministers unexpectedly agreed to ease production curbs, which will see roughly 2.3mbpd back online from now until July. This also comes at a time where large oil importers such as India are seeing a rise in Covid cases. Therefore, going forward, heightened volatility is likely to persist for the crude oil market.
- Crude Oil Prices Choppy Conditions Persist
- Geopolitical Risks on the Rise
- API Inventories Show Larger Than Expected Drawdown
API Recap: Overnight, the latest API inventory data showed a larger than expected drawdown of 2.6mln barrels (exp. 1.4mln drawdown), which has kept oil prices afloat for now. Looking ahead towards the DoE report, expectations are for a drawdown of 1.4mln barrels.
Geopolitical Risks: Another factor to consider is rising geopolitical risks, which can increase the likelihood of short-term spikes in Brent and WTI crude futures. Iran had earlier confirmed that its commercial ship in the Red Sea had been slightly damaged by an explosion.
Elsewhere, a recent step-up in the Russian military checks around borders of the Ukraine have garnered attention in recent sessions, resulting in notable weakness in the Russian Rouble, but as tensions begin to rise, oil prices may be subject to a bout of volatility.
Brent Crude Chart: Daily Time Frame
Retail trader data shows 67.78% of traders are net-long with the ratio of traders long to short at 2.10 to 1. The number of traders net-long is 6.69% lower than yesterday and 13.39% higher from last week, while the number of traders net-short is 7.11% higher than yesterday and 7.27% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall.
Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Oil – US Crude trading bias.