Oil Price Fundamental Daily Forecast – WTI Specs Reduce Long Positions

Crude Oil futures are trading lower early Monday, pressured by worries over the global supply glut. Traders are also expressing doubts over OPEC’s ability to cut production, trim the excess supply and stabilize prices.

At 0430 GMT, August West Texas Intermediate crude oil is trading $44.81, down $0.16 or -0.36% and September Brent crude oil is at $47.47, down $0.16 or -0.34%.

Both markets are hovering near multi-month lows so technical factors as well as fundamental factors will influence the price action today.

Bearish technical traders will try to trigger stops under last week’s lows, hoping for an acceleration to the downside. They will try to encourage the hedge funds and money managers to continue to liquidate their current long positions.

According to the latest Commitment of Traders data released by the Commodity Futures Trading Commission (CFTC) on Friday, large speculators sharply cut back on their bullish net positions in the WTI Crude Oil futures markets this week following strong gains in the previous four weeks.

Crude oil prices are now down almost 13 percent since late May, when producers led by OPEC extended their pledge to cut production by 1.8 million barrels per day (bpd) by an extra nine months until the end of the first quarter of 2018.

Traders are saying that the main factor driving prices lower is a steady rise in U.S. production undermining the OPEC-led effort to tighten the market.

Bearish factors continue to line up. According to Baker Hughes, the U.S. oil rig count continued to rise, up by 6 last week. Goldman Sachs is now saying that if the rig count stayed at current levels, U.S. oil production would increase by 770,000 barrels per day between the fourth quarter of last year and the same quarter this year in the shale oil fields of the Permian, Eagle Ford, Bakken and Niobrara.

Signs of lower demand in Asia could also weigh on prices. There is new evidence that demand growth in the world’s biggest oil consumer area is stalling. Japan’s imports fell in May. Imports also dropped in India.

Although the market may be subject to periodic short-covering rallies, the overall theme is bearish. The current data reflects the fact that reducing the global supply glut will be a challenge.