The Crude Chronicles – Episode 46

<h2>WTI Longs Reduced Amidst Second Wave Fears</h2>
<p>The CFTC COT institutional positioning report showed that traders reduced their net long positions in WTI by 17,057 contracts last week, taking the total position to 543,826 contracts. This adjustment, which marks some of the largest selling since the peak of the oil slide earlier in the year, reflects the fresh risk factors which are threatening oil markets.</p>
<p>Concerns around a potential second wave of the virus, given the recent upward trend in new infections noted in some countries, most notably the US, is raising fears of a further downside demand shock. For the time being, the spike in new infections does not appear to be accompanied by a rise in the death toll. However, with some US states already choosing to reimplement stricter lockdown measures, should the death toll begin to rise again, a broader environment of returned lockdown measures is likely to develop which would be highly bearish for oil demand.</p>
<h2>US/China Tensions Rising</h2>
<p>Along with the concerns over the rising infections numbers seen in parts of the globe, there are renewed concerns over US/China tensions and the potential for these to impact the fragile trade negotiations underway. The US administration is due to announce fresh sanctions against China, expected in coming days, with China likely to retaliate. If this latest standoff develops further, it could have serious repercussions for global oil demand if the phase one trade deal is cancelled, as Trump has previously threatened. This would be especially damaging now on the back of the huge demand shock seen over the course of the pandemic so far.</p>
<h2>EIA Reports Large Stockpile Build</h2>
<p>In its latest weekly update, covering the period up to Friday July 3^rd, the EIA reported that WTI stockpiles in the US rose by a further 5.7 million barrels. The data was disappointing, coning on the back of the prior week’s 7.2 million barrel decline which WTI bulls hoped was the beginning of the post lockdown demand spike. However, the data was not all bearish as US gasolines stores were seen lower by nearly 5 million barrels suggesting that demand is picking up gradually though given the risk of lockdown measures returning now amidst a rise in new infections, the outlook is mixed.</p>
<h2>Technical Views</h2>
<p><strong>WTI (Bullish above $29.14)</strong></p>
<p>From a technical viewpoint. WTI has now recovered as far as the $41.35 level which is a key, long-term resistance level. Bulls will need to see price back above here to avoid a correction lower. Should fall price reverse from here, the main support area to watch in the medium term is the $29.14 level. While this level holds, the longer-term view remains bullish with $50.32 the next topside target to note, ahead of the long term bearish trend line from 2008.</p>
<p><img class="aligncenter wp-image-46790 size-full" title="The Crude Chronicles – Episode 46" src="http://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10.png" alt="The Crude Chronicles – Episode 46" width="2954" height="1580" srcset="https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10.png 2954w, https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10-300×160.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10-1024×548.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10-768×411.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10-1536×822.png 1536w, https://blog.tickmill.com/wp-content/uploads/2020/07/Screenshot-2020-07-09-at-09.38.10-2048×1095.png 2048w" sizes="(max-width: 2954px) 100vw, 2954px" /></p>
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