The latest Commitment of Traders report covering the week to August 8, showed a near unchanged combined hedge fund long in WTI and Brent futures, at 421 million barrels, six weeks after the net long reached a three-year low at 231 million barrels. As we noted in our latest update, the bulk of the buying during this time has primarily been driven by shorts being bought back, and not fresh longs entering the market. It highlights a certain hesitancy about extending positions beyond current levels amid the risk to demand and, not least, the potential risk of financial and politically driven supply restraints being reversed.
Later today, the EIA will publish its weekly crude and fuel stock report and the market is potentially looking for a bigger than expected crude stock reduction after the American Petroleum Institute last night reported a 6.2 million barrels draw versus 1.7 million expected. Traders will also be watching changes in gasoline and diesel stocks as well as exports, refinery activity and production estimates.
In Brent, a close below the 21-day moving average, currently at $84.38, will be needed to signal a pause in the bullish momentum that has prevailed since late June. A break could open for a move towards the 200-day moving average line, which is currently offering support at $81.25, while above the market, a band of resistance exists between $87.50 and $89.