Strategic trade
Trade view / 29 August 2016 at 12:26 GMT

#SaxoStrats: More weakness ahead for WTI

Head of Commodity Strategy / Saxo Bank

In our weekly “Commitments of Traders” update earlier today, we highlighted how oil bears have been exiting the market at the fastest pace on record. 

August has been a crazy month in terms of movements in the oil market. At the beginning of the month, hedge funds driven by the outlook of rising oil and product inventories had accumulated a record gross-short in WTI crude oil. These positions were hurt badly by the resumption of verbal intervention, not least from the Saudi oil minister. 

During a two week period up until August 23 funds bought a record 142,000 lots with 85% of the buying being short-covering. During the latest of these two weeks some 84,000 lots were bought, all of it above $46.50/barrel.

Adding Brent crude oil to the equation, we find that the net-long during the past few weeks has surged to 627,000 lots. 

Crude oil

Create your own charts with SaxoTraderGO click here to learn more

While the supporting re-balancing of the global oil market continues, we find that most of the rally seen over the past three weeks has been driven mostly by short-covering. With fundamentals yet to provide oil with a strong enough tailwind to break higher, we see the short-term risks once again being skewed to the downside. 

The combination of renewed dollar strength and doubts about Opec’s ability to show a united front could add to the negative sentiment over the coming weeks.

Short-term chart (WTI):
WTI crude oil
Source: Saxo Bank

Long-term (WTI):
WTI crude oil
Source: Saxo Bank 

Management and risk description

Key risks include continued verbal intervention from Opec members, the US inventory report on Wednesdays, and the US jobs report on September 3.

From a seasonal perspective crude oil has fallen every September for the last five years as inventories rose in response to lower refinery activity. 


Entry: sell CLV6 or OILUSOCT16 on a stop at $46.40.

Stop: $47.80 (1 ATR).

Targets: $44.70 and $43.60/b.

Time horizon: one to two weeks.

— Edited by Michael McKenna

For more on commodities click here.

Non-independent investment research disclaimer applies. Read more
30 August
Ole Hansen Ole Hansen
Crude oil has reversed earlier gains led by weakness in gasoline. The entry point of this trade idea has been hit.
31 August
SvsG SvsG
Hi, do you have any update before the inventory report?
31 August
AlexF AlexF
Yes please in at 46,45 would you add before report ?
31 August
SvsG SvsG
I mean ahead of today's inventory report. (Just to avoid misunderstanding)
31 August
Ole Hansen Ole Hansen
Writing a short update which will be posted on TF shortly. You can also follow me on twitter @Ole_S_Hansen where short updates are posted regularly
31 August
SvsG SvsG
01 September
Ole Hansen Ole Hansen
The first take profit level has been hit at $44.7/b following the bearish inventory report. The stop on the remaining position can now be lowered to entry level which coincides with Wednesday's high.
01 September
Ole Hansen Ole Hansen
The second take profit level has now been hit at $43.6/b with funds exiting longs faster than they got in.
02 September
SvsG SvsG
Nice trade.Thanks.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail