Crude Rises But Still Down On The Week, Speculators Pull Out

Oil prices recovered somewhat on Friday with the return of risk appetite but were still down around 6.5% on the week. WTI rose 4% and closed above $70 at $71.34/bbl. It is higher again at the start of APAC trading at $71.57. The USD index finished 0.1% lower.

• WTI fell 7% over the first week of May. Brent was down 6.2% w/w after also rising 4% on Friday to close above $75 at $75.37. WTI is approaching resistance at $71.90, the May 3 high, while Brent is just under resistance at $75.58 which if broken opens up $77.36, the April 27 low.
• Last week’s dive in oil prices spooked market participants with net-long crude positions falling 19%, the largest drop in 6 weeks bringing levels to their lowest for more than 10 years for the time of year, according to Bloomberg from US CFTC data. This is creating a liquidity problem in the market which could exacerbate volatility. Implied volatility is at its highest in over a month.
• Russian indicators have not pointed to a reduction in output, as announced, while the expected strong rebound in demand from China has not materialised. Both of these need to happen to return confidence to the oil market.