In the week ending 12 Aug, the two major crude oil benchmarks (Brent and WTI futures) extended their price decline. However, the bearish momentum weakened as prices consolidated. Ahead of the US-Russia summit in Alaska, money managers took an increasingly bearish stance as the Trump-Putin meeting raised expectations of a major diplomatic breakthrough, including sanctions relief. An agreement between the US and China to postpone the higher tariffs deadline for 90 days limited the downside. From a technical perspective, prices in both contracts crossed below their structural 100-day moving averages and the Ichimoku cloud, a bearish sign. Still, the lagging line is trending inside the cloud, which may provide near-term support.
Money managers were clearly bearish. Long positions fell by 30mb (-6%), while shorts rose by 32mb (+18%). Long positions fell to their lowest level since May, and short positions surpassed 200mb for the first time since early June. The long:short ratio came off from 2.76:1.00 to 2.18:1.00 (10th percentile for all weeks since 2013), a historically bearish level. The market is now saturated with short positions and prone to a bullish reversal in the event of a bullish catalyst.
