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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Investor Sentiment Could Be Shifting

A drop in U.S. crude oil production helped drive futures prices higher this week. There is even evidence of renewed hedging in the deferred futures contracts that suggest the bottom has been made.

The slowdown in U.S. crude oil production is the key to sustaining the rally since excessive production was the driving force behind the tremendous price slide. The recent inventory figures suggest that cutbacks in oil production and oil exploration may finally be taking hold. U.S. production fell for the second time in three weeks and refinery runs are spiking higher indicating increased demand. Market participants seem to be indicating that they believe that U.S. production is slowing, at least for now.

The recent Commitment of Traders data released by the Commodity Futures Trading Commission also indicates a possible shift in investor sentiment. The report covering the March 31st to April 7 time period showed that speculators increased their overall bullish bets.

The non-commercial contracts of crude oil futures saw a weekly change of +25,348 contracts to total a net position of +252,043 contracts. Long positions in oil futures increased by 4,901 contracts, while the short positions fell by 20, 447 contracts.

Despite the rally, the market remains oversupplied according to most fundamental analysts, but the price action and chart pattern suggest that traders still haven’t taken out enough of the weaker speculators holding on to short positions for…

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