CME Group’s flash data for crude oil futures markets noted traders reduced their open interest positions for yet another session on Monday, now by around 5.6K contracts. Volume followed suit and went down by nearly 23K contracts.
WTI: En route to the November 2022 high
WTI prices extended the rally for yet another session on Monday, closing above the $92.00 mark for the first time since November 2022. The extra uptick was on the back of declining open interest and volume, which hints at the likelihood that a potential corrective move could be in the offing. On the upside, the next hurdle remains at the November 2022 peak at $93.73 (November 7).
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As the global oil market is undergoing one of its biggest downturns ever due to the unexpected fall in demand, the long-term outlook seems to be looking more bearish for crude oil prices. With the world’s economies likely to experience one of the deepest recessions ever, the demand for fuel and other energy commodities is likely to remain weak for the foreseeable future. The demand for crude oil, in particular, is expected to remain weak, as the global transportation industry is under immense strain.
In this context, the short-term outlook for crude oil futures is looking bearish as well. Crude oil futures have fallen by over 30% from their peak of around $64 per barrel in early March, and a near-term correction could be on the cards in the coming weeks. On the other hand, with geopolitical tensions in the Middle East continuing to fuel oil prices, any potential further geopolitical developments could have a positive impact on crude oil prices. Nevertheless, with demand likely to remain weak and supply expected to remain ample, a significant short-term rally does not seem to be on the cards.
In addition, geopolitical tensions in the Middle East should be monitored closely over the coming weeks. Any further escalation of the hostility between the different nations in the region could lead to further supply disruptions and further push up crude oil prices. This could lead to an increase in the long-term outlook for crude oil, as investors will begin to speculate that a more protracted disruption in supply could send prices higher.
In conclusion, the short-term outlook for crude oil is most likely bullish in the near term, driven by geopolitical tensions in the Middle East. However, with the long-term outlook remaining bearish, investors should be mindful that a near-term correction could be in the cards. Careful monitoring of geopolitical developments, in particular, will be key in order to get a better understanding of the longer-term dynamics of the oil market.