Crude Oil Outlook
Support for crude oil futures continued to erode last week after the release of another bearish supply/demand report. Although the latest Commitment of Traders report showed speculators increased bullish bets, the size of the increase wasn’t enough to stem the decline in prices.
According to the latest weekly supply/demand report from the U.S. Energy Information Administration, crude oil inventories rose by 1.5 million barrels the week-ended December 5. This came as a complete surprise to traders who boosted long positions in anticipation of a 2.6 million barrel decline.
The latest CFTC Commitment of Traders report showed that non-commercial contracts of crude oil futures, held by large speculators, traders and hedge funds, rose to a total net position of +264,996 contracts, in the data reported on December 2. This was up 11,995 contracts from the previous report. This change represented an increase in long positions of 8,097 contracts and short position decline of 3,898.
The increase in the number of long positions was not enough to support the market as many of these new longs probably liquidated positions after the release of the bearish inventory report. This action/reaction type trading has actually been fueling the entire $40+ decline in price since June.
Non-commercial traders who continue to buy may be doing so in an effort to catch the bottom of the market, but this strategy has failed several times over…