SpotCrude – higher levels starting to impact risk

Further highs in crude have been seen in this momentum move. This time courtesy of some punchy OPEC forecasts for a 3.3m barrel p/d deficit in Q4. The IEA (International Energy Agency) are due to provide their update in the session ahead, and one can also expect a change in the forecast, given they previously pencilled in a 230k bpd deficit. $90 is the obvious round-number target for longs, ahead of the Oct 2022 highs of $93.52.

Clients are biased to fade the move here though (61% of open positions are now held short), but while crude is certainly overbought one considers the trigger for a pronounced mean reverting move. Higher levels from here are likely going to increase market anxiety, where we see inflation expectations rising once again.