Five Week Win-Streak Snapped

A five week win-streak for petroleum prices was snapped in the aftermath of Iran’s missile debacle, leaving the futures complex on the cusp of breaking the bullish trendlines in place since September.

Money managers were looking confident in higher prices as of Tuesday, January 7, when the latest Commitments of Traders data was compiled, with the large speculative category adding to long positions in WTI, Brent and RBOB. The whipsaw action Tuesday night into Wednesday no doubt sent a shock wave through those bettors, although we won’t get to see the change in positions until this Friday’s report.

RBOB looks the most precarious with managed funds holding more than 100,000 contracts of net length, the only time they have ever had this large of a bet on higher prices in January. Whether or not those funds start rushing for the exits may well be a driving factor in the price action for the balance of the month.

Baker Hughes reported 11 more oil rigs were taken offline last week, bringing the total U.S. count to 659 active rigs, the lowest level since March 2017.

While drilling activity slowed dramatically in 2019, the EIA published a new study this morning showing that proven reserves of U.S. oil and natural gas surged to new record highs and with plenty of new pipeline capacity available now to bring that to market, those reserves look like the world’s supply safety valve for years to come.

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