WTI holds in higher territories in the $30s on bullish market sentiment

• West Texas Intermediate sits in the $32 handle. 
• Oil futures posted their highest settlement in more than two months.

The price of a barrel of oil has seen territory on the $33 handle in terms of West Texas Intermediate having travelled from a low of $29.59 lows at the start of the day. The risk-on mood has been developing since the turn of Asia which has lifted all boats. Oil was one of the first asset classes to show signs of bullishness overnight although it hit a roadblock as investors remain cautious and take profits. 

“Energy markets continue to firm despite a more negative risk sentiment environment — implying that the recovery in the complex is resilient enough to withstand ebbs and flows in risk appetite,”

– analysts at TD Securities explained. 

Oil futures rallied on Monday and posted their highest settlement in more than two months. We are seeing some progress towards a rebalance of supply-demand dynamics. WTI June delivery added $2.39, or 8.1%, to settle at $31.82 a barrel on the New York Mercantile Exchange.  

Markets, are, however, looking forward to the volatility that could come out of this Tuesday’s settlement which will follow on the heels of May’s contract where the contract fell into a subzero territory on April 20 for the first time in history. 

The Organization of the Petroleum Exporting Countries and allies have pledged to cut around 9.7 million barrels a day in oil through to the end of June which has helped to buoy the prices. “This comes amid pledges from Gulf countries to accelerate the Great Rebalancing by further trimming their oil sales, just as the US marks its first inventory draw at Cushing for the first time during the coronavirus trading regime,” analysts at TD Securities exolained.

As the rate of inventory accumulation continues to ease, so will the steepness of the super-contango. We remain long WTI Dec20-Dec21 spreads to express this view. With that said, CTAs remain positioned for further downside, and we do not expect significant flow from this group of participants.

WTI levels