In the week ending 20 May, the M1 Brent futures contract trended sideways, moving between $63.50/bbl and $66.50/bbl, closing the week at $65.60/bbl. We subsequently saw even more weakness, with the futures contract trading at $63.95/bbl at the time of writing on 22 May. This quietness highlights directional uncertainty in the market, with price action’s average true range (ATR) declining steadily all week. Moreover, this weakness emerged following two consecutive weeks of builds in US crude inventories; although in the week ending 13 May, the market focused on 14 May’s EIA-reported build of 3.454mb.
Interestingly, however, Onyx’s weekly CFTC COT predictor forecasts money managers will add to their long positions in Brent futures, ICE LS gasoil futures and the US RBOB gasoline futures. We further expect to see rising producer hedging in Brent futures and anticipate prod/mercs will be risk-on in ICE gasoil.
