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  • WTI supply-side support has been baked into the cake.
  • COVID infections/reopening developments will be closely watched.

WTI is making tracks to the upside at the start of the week, rising some .4% so far from a low of $40.23 to a high of $40.51.

Last week’s closing session had US futures in WTI fell back towards $40, with the August contract closing at $40.32, while Brent Sep closed at $42.80. 

However, the worries over demand recovery on growing fears of coronavirus resurgence has done little to stem the flows into the black gold at the start of the week.

The US has reported the jump in virus cases by 50000 for the third consecutive day last Friday which raised questions over fuel demand recovery from the top oil consumer.

Not even the weekend news, close to the home of WTI, has been able to curb the bulls intent to take prices higher. 

Texas has reported its biggest daily increase in the number of confirmed coronavirus cases – 8,258. Hospitalizations also continue to climb.

Instead, a recent run of upbeat economic data continues to lift spirits ad hopes that economic activity will keep picking up pace. Also, the progress in vaccine development has been supporting the price.

Trend follower positioning remains constrained

The ‘Great Rebalancing’, which has helped crude oil prices sharply recover, may have entered into a new stage, analysts at TD Securities argued. 

Our real-time supply indicators are signaling that supply-side support has been baked into the cake, following this period in which it provided extreme support for prices.

Trend follower positioning remains constrained across the complex amid a high volatility environment.

Nevertheless, COVID infections/reopening developments will be closely watched through the week as we head into a summer lull and prospects of lockdown, curtailing demand for energy in what would normally be driving season.

Looking ahead, OPEC is due to meet a week on Wednesday and focus on whether current cuts are extended for another month or rolled back will be important for sentiment.

WTI levels