Overall sentiment surrounding crude has remained firm on OPEC hopes with oil futures also gaining some support from delays in increasing Libyan exports together with a slightly weaker dollar tone.
Oil futures were resilient in US trading on Friday with a gradual advance from the $51.00 p/b area in WTI futures. Sentiment was initially boosted by confidence in the overall supply/demand balance with a weaker dollar later in the European session also providing support.
The latest Baker Hughes data recorded a further increase in oil rigs to 510 from 498 the previous week and there has been an increase of over 60% since the May low point.
The data maintained expectations that US production would rise after a weekly increase recorded in the latest EIA inventories data and will act as a headwind to oil prices.
The latest COT data recorded a sharp increase in overall net long oil positions to just above 303,000 in the latest week from below 271,000 the previous week and the strongest long position of 2016. There was a strong increase in open interest for the week.
The data illustrates underlying market confidence in the outlook for crude futures following the OPEC deal to cut production, but will also increase the risk of sharp position adjustment if spot prices come under pressure.
A slightly weaker tone in USD/JPY continued to provide some relief to oil futures on Monday, although the US currency was broadly resilient with some fresh advance in the US currency against European and commodity currencies.
Although Libya has re-opened a pipeline from the Sharara oil field, there has been a further delay in oil shipments and deliveries from El Feel have also not re-started, which also helped underpin market confidence.
January WTI futures pushed to highs near $52.40 early in the European session before dipping back to the $52.00 area. February WTI futures were just below the $53.00 p/b level with February Brent futures around $55.30.
Trends in the dollar will continue to have an important impact and position adjustment will also have an important impact for the week as a whole with the risk of notably choppy trading conditions.
Oil Futures 4H Chart
Tim Clayton – He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks.