Oil Traders Increase Longs

The CFTC COT positioning report shows that US crude traders increased their net long positions last week by 23,403 contracts, taking the total position to 472769. The uptick in crude oil longs likely reflects the ongoing drive by traders to maintain positive risk appetite despite fears around a second wave of COVID-19. Equities markets have been pushing higher again this week, helping lend some support to crude oil. Despite this, price action remains off recent highs posted last month as oil remains within a corrective bearish move for now.

OPEC Output Increased over September

Given the rising concerns over the impact a second wave of the virus could have on crude demand levels, there are expectations that OPEC+ will be forced to announce further measures. At the latest OPEC+ meeting, the group’s de-facto leader Saudi Arabia called on members to adhere strictly to the ongoing supply restrictions in the face of fading global demand. However, a Reuters survey released this week has shown that OPEC output has actually risen for a third straight month over September. The survey revealed that the restarting of some Libyan installations along with increased Iranian exports has offset the supply cuts in place across the OPEC+ group.

Expectations For Further OPEC Measures

OPEC averaged 24.38 million barrels per day over the month, according to the survey data, up from the prior month’s 160k barrels per day. The increase in supply is occurring at the same time that fears around a second wave of the COVID pandemic are starting to hit demand levels again. Oil prices have fallen around 10% over the last month has fresh COVID fears have emerged. With Libya and Iran exempt from the OPEC+ pact (OPEC & a group of aligned non-OPEC members lead by Russia) there are concerns that a continued increase in supply will weigh further on WTI prices. OPEC+ recently reaffirmed its commitment to maintaining the current supply restrictions amidst a reduction in the groups global demand forecasts for 2020 and 2021 though, if the pandemic accelerates again, here are expectations that further measures will be needed.

EIA Records Another Drawdown

The latest EIA report in the US offered some positivity for WTI traders this week at least. The EIA reported a further drawdown in US crude stockpiles which fell by another 2 million barrels last week. US oil stocks have been falling steadily over recent weeks though the momentum in the declines has started to weaken.

Technical Views

WTI (Bearish below $41.35)

From a technical viewpoint. WTI prices are currently consolidating below the$41.35 level, where the bearish trend line from 2020 highs is also creating resistance. While prices hold below this level the current move has room to develop further to the downside. The next support to note is the $25.79 level ahead of deeper support at the $29.14 level . To the topside if price can break back above the $41.35 level and the bearish trend line, attention will turn back to the $50.32 level again.

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