Oil falls as Russia talks down production cuts

Summary:

• Oil slides lower on Russian energy minister comments

• Short positioning jumps in record streak

• Oil back below $66 a barrel

There’s been further selling seen in the energy space today with both Oil and Oil.WTI sliding following comments from the Russian energy minister. NATGAS has enjoyed some big days of late and it seems like it is on course for another with the market soaring over 5% and adding to large gains seen already this month. Turning our attention to crude the market had looked to recover towards the end of last week after some heavy selling but this afternoon it has come back under some pressure. Oil is back below the $66 handle and not too far from the recent swing low of 64.66. Russian energy minister Novak said they need to watch the market in the weeks ahead before making any decisions. "We need to see how the situation develops in November and early December to better understand bot the current conditions and the market outlook," he said.

Oil has dropped lower today following comments from the Russian energy minister Novak, with price moving back towards recent lows of 64.66. Source: xStation

Looking at the latest speculative positioning in both Brent (Oil on xStation) and WTI (Oil.WTI on xStation) it seems that hedge funds are betting OPEC will struggle to reverse the recent plunge which has seen both crude oil benchmarks fall into a bear market. Looking at both markets in aggregate wagers against price rising increased for a 7th straight week which is the longest run of short-selling in data going back to 2011. Bearish bets jumped 14% in the week ended November 13th and have tripled since the end of September.  

There’s been a large increase in net-short positioning in the Oil markets of late, with 7 consecutive weekly increases. Source: Bloomberg

This rise in bearish bets came after a 12-day losing streak for WTI crude - the longest on record - which culminated in a drop of more than 7% last Tuesday. Weekly inventories in the US are also doing little to aid the cause for a recovery in price, with the most recent figure showing a rise of more than 10M. The longer term chart for Oil.WTI is arguably nicer than that for Oil, with the former seeing recent lows of 54.80 coincide with prior swing levels. Last week’s bounce moved up to 58.10 and this could now be seen as resistance going forward. If 54.80 can hold and provide a floor then a recovery could lie ahead but a break below there could see things turn ugly, with little by the way of swing support below there for quite some way.

Oil.WTI has been respecting prior swing levels nicely of late with 54.80 acting as support and 58.10 offering resistance. Source: xStation