Commodities
had a bad week caused primarily by correction in metals which couldn’t be
compensated by slight bounce in Energy and Agriculture. The OPEC delivered
extension of the production cut as the market expected, however as this was
already priced in there wasn’t enough buying power to take prices to new highs.
As the
huge rally from the end of summer was mainly based on the expectations that in
Vienna the OPEC and the non-members lead by Russia will agree on the extension
of the production cap, the news had limited impact last Thursday. The Friday
move was likely just another reduction of short positions where some bears gave
up. The biggest worries are now around the growing US oil production. While
shale oil companies more and more seem to commit to growing shareholder value
rather than market share, the US oil rig count and the US production is still
on the rise. This can mean a hurdle in the efforts of OPEC and Russia to bring
the market back to balance.
US Oil
production – Source EIA and Land of Trading
The
speculative positioning is extremely skewed toward the long side (763,786 longs
vs 153,953 shorts) and such a concentration always brings the risk of a
volatile squeeze. The effect of the extension of the supply cut on the
inventories could be delayed according to Saudi oil minister by a seasonal
decline in demand during winter. US oil rig counts published by Baker Hughes
however keep growing currently at the highest levels since September.
CFTC COT
Report NonCommercials positioning WTI
Technically
we are in a strong resistance zone on WTI and after the OPEC deal was priced in
well ahead, the market doesn’t seem to be strong enough to break much higher
anytime soon. I expect the prices under the pressure of incoming bearish to
drop back to previous supports before they would take off again.
Good
Luck and remember to watch your risk and be consistent
Mr. Tech
Man
DISCLAIMER:
This material was created for informational purposes only and represents the
Land of Trading team’s view of the past and current economic and capital market
environment. It is not an investment advice and should not be viewed that way
at all, and the creators of this material cannot be held liable for any
potential losses resulting from trading, where despite this disclaimer someone
would consider this material as an investment advice. All rights reserved
©2016.
Contact:
landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com
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