Technical, fundamental traders battle over oil

Commodities 5 minutes to read

Ole Hansen

Head of Commodity Strategy

Summary:  Oil traders must weigh supportive fundamentals against a short-term technical deterioration.


Update: While the initial price reaction was fairly small, the weekly EIA report was on balance price-negative given the huge build in crude oil stocks to almost 10 million barrels last week and another adjustment higher in the production to 12.3 million barrels/day. Offsetting this somewhat was a smaller than expected increase at Cushing, the delivery hub for WTI crude oil futures. Gasoline stocks, meanwhile, showed their first build in 10 weeks.
EIA Petroleum Status Report
EIA Petroleum Status Report
Crude oil traders focusing primarily on technical signals have so far not managed to get the follow-through to the downside that last week's ugly bar signaled. Brent crude oil began last on a tear to reach $75/b for the first time since early November. The two main drivers were the US decision to not extend Iranian waivers towards eight countries after May 1 and the Russian pipeline contamination that has cut flows of Russian oil into Europe. 

The realisation that Washington would struggle in its quest to bring Iranian exports down to zero, as well as the stronger dollar, helped drive the price lower ahead of the weekend. This resulted in a bar similar to the one that signaled a top in the market last October. The battle between strong supportive fundamentals and a short-term deterioration in the technical outlook has kept the market stuck in a relatively tight range so far this week.
Source: Saxo Bank
In the week to April 23, the combined hedge fund long in Brent (+396k lots) and WTI (314k) reached 710k lots, the highest since October 9 of last year. Some 117k lots have been added since Brent broke above $70/barrel; despite supportive fundamentals, a short-term deterioration in the technical outlook following Friday’s ugly close has for now left some recently established longs at risk.
Up next we have the weekly stock report from the US Energy Information Administration. While oil is currently hovering close to unchanged, some weakness was seen earlier after the American Petroleum Institute reported a larger than expected increase in US crude oil stocks last night.
Source: Bloomberg, API & EIA

Saxo Bank A/S - Representative Office
Boulevard Plaza - Tower 1
30th floor, office 3002
Dubai Downtown, Burj Khalifa area
Dubai
UAE

UAE

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.