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US Crude Oil Price Outlook: Sentiment Data Suggest a Rally

US Crude Oil Price Outlook: Sentiment Data Suggest a Rally

2019-07-04 15:30:00
Martin Essex, MSTA, Analyst and Editor

US crude oil price, news and analysis:

  • US crude oil prices have been falling on news of rising inventories and forecasts of weak global demand.
  • However, they now seem to be stabilizing and retail trader positioning figures are sending a bullish signal.

Crude oil price rally on the cards

For the last few days, US crude oil prices have been sliding lower despite news from the US Energy Information Administration that US crude inventories fell by another 1.1 million barrels in the week to June 28 after a drop of 12.8 million barrels the week before.

The latest reduction was smaller than the predicted 2.8 million and there are signs that demand for oil in the US could be slowing as the economy shows signs of weakness; both have contributed to lower prices.

US Crude Oil Price Chart, Hourly Timeframe (July 1-4, 2019)

Latest crude oil price chart.

Chart by IG (You can click on it for a larger image)

However, figures on the positioning of retail customers of IG suggest that the next move could be higher. The data show that 59.3% of retail traders are now net-long, with the ratio of traders long to short at 1.46 to 1. In fact, traders have remained net-long since May 22, when US crude traded near $62.85 per barrel; its price has moved 9.8% lower since then. The number of traders net-long is 9.3% lower than yesterday and 2.2% higher from last week, while the number of traders net-short is 20.4% higher than yesterday and 3.9% higher from last week.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests US crude prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Those recent changes in sentiment warn that the current crude oil price trend may soon reverse higher despite the fact traders remain net-long.

US Crude Oil Positioning Data

Latest crude oil positioning data.

Source: IG/DailyFX

You can click here for longer-term forecasts for the crude oil price in Q3

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


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