oil

Crude oil maintains support amidst array of bullish signals

Commodities 5 minutes to read
Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Key points

  • Crude oil holds above key support, in WTI around USD 80 and USD 85 in Brent
  • Ahead of EIAs weekly report, the API reported a bumper 9.3 million barrel crude stock build
  • Underlying fundamental support up against short-term risk of fund long liquidation

Crude oil continues to be supported by geopolitical uncertainty amid Ukraine drone attacks on Russian oil infrastructure, extended OPEC+ production cuts including Russia's recent pledge to make extra cuts and signs of gasoline consumption strength. However, following the mid-March break higher the market has turned its attention to consolidation, leaving the market short-term exposed to long liquidation from technical-driven funds that bought the break above USD 80 in WTI and USD 85 in Brent.

27olh_oil1
Source: Saxo

Current headwinds apart from dollar strength and the current overhang of recently established long positions were last night's crude and fuel stock report from the American Petroleum Institute which showed a bumper 9.3 million barrel increase in crude stocks being only partly offset by lower gasoline stocks (see inserted table below).

While a build in crude and a drop in gasoline stocks are in line with the seasonal behaviour, the strength of the changes may still impact prices. I will post the results of the EIA report on X at @ole_s_hansen once published at 13:30 GMT.

27olh_oil2

Money managers, like hedge funds and CTAs tend to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Since hitting an 11-year low last December at 170 million barrels, they have steadily been increasing their exposure in the WTI and Brent crude oil futures contracts, culminating in the week to March 19 when the net buying exceeded 100 million barrels (105k contracts), lifting the net long to a five-month high at 509 million barrels.

Being followers of trends and momentum these traders will buy into strength – and sell into weakness - and during the mentioned reporting week both WTI and Brent broke higher, thereby triggering the relatively aggressive buying response. Despite the multiple tailwinds mentioned above currently supporting the market, this behaviour highlights a market that could still run into technical selling should prices revert back below USD 80 in WTI and USD 85 in Brent.

27olh_oil3

Commodity articles:

26 Mch 2024: Gold's behaviour points to sustained demand
20 Mch 2024: 
Attacks on Russian refineries lift risk premium and crude prices
19 Mch 2024: 
How to add copper exposure to your portfolio
15 Mch 2024: 
Commodity weekly: Green shoots seen across key sectors
13 Mch 2024: 
Lack of catalyst pushes crude into tightening range
8 Mch 2024: 
Commodity weekly: Gold and silver steal the limelight
8 Mch 2024: 
Investing with options - Gold optionality
6 Mch 2024: 
How to add gold exposure to your portfolio
6 Mch 2024: 
Video: What happened to the gold prices?
1 Mch 2024: 
Grains dip, cocoa soars, gold and oil see rays of strength: February’s commodity mix
29 Feb 2024: 
Podcast: Why speculative interest is important to understand
28 Feb 2024: 
Oil price stuck in neutral despite underlying strength
27 Feb 2024: 
Resilient gold market defies lower rate cut predictions
22 Feb 2024: 
Copper short squeeze fades ahead of key resistance
21 Feb 2024: 
Gold's resilience despite recent futures and ETF selling
20 Feb 2024: 
WTI crude eyes resistance amid improved signals
16 Feb 2024: 
Commodity weekly: Grains tumble; Industrial metals eye China boost
15 Feb 2024: 
US rate cut delay drives gold below $2000
13 Feb 2024: 
Video: What is driving Cocoa's sweet price
9 Feb 2024: 
Commodity weekly: Refined product strength lifts crude
9 Feb 2024: 
Podcast: Year of the metals
7 Feb 2024: 
Crude oil supported by tightening fuel outlook
6 Feb 2024: 
Gold and silver turn defensive on reduced Fed rate-cut optimism
2 Feb 2024: 
Commodity weekly: Tight supply adds fuel to uranium and cocoa rally
1 Feb 2024: 
Commodities: January performance and ETF flows

Previous "Commitment of Traders" articles

25 Mch 2024: COT: Hedge funds zoom in on crude, copper and silver
18 Mch 2024: 
COT: Hedge funds buying expands from precious metals to copper and grains
11 Mch 2024: 
COT: Specs rush back into gold, elevated yen short in focus
4 Mch 2024: 
COT: Underinvested speculators fuel gold's latest surge
26 Feb 2024: 
COT: Record corn short, cocoa surge no longer supported by speculators
19 Feb 2024: 
COT: US inflation surprise drives broad selling of metals
5 Feb 2024:
COT: Speculators chase false crude break; grain short extends further

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.