Crude oil bounces with short sellers back in focus

The strength seen so far today is likely to have been supported by comments from Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman speaking at the Qatar Economic Forum in Doha. Once again, he reiterated that OPEC+ through its actions seeks stability more than targeting a certain price level or range. He also talked about his dislike for speculators trying to influence the price of oil, saying that speculators got hurt by the April 2 production cut and that they should “watch out”.

His comments highlighting growing unease the weakness seen during the past month. Some of which has been driven by fresh short selling with the latest Commitment of Traders data showing short sellers have made a comeback. In the week to May 16 the combined gross short in WTI and Brent, held by money managers and Other Reportables reached a near two-year high at 233 million barrels, a 111 million barrel increase in the last five weeks and 40 million barrels higher than the gross short that was registered ahead of the April 2 production cut.

Brent crude oil trades within a narrowing range, currently between $74.50 and $77.50, and based on current positioning the upside potential is on the rise. However, in order to signal a low in the market the psychological $80 level needs to be challenged and broken first. Until then the market is likely to remain rangebound. In WTI, a similar behaviour has emerged with the current range being $70 to $73.90.