WTI net long positioning to see further trimming – DB

FXStreet (Barcelona) - Strategists at Deutsche Bank, view that with the oversupply in US fuelling the bearish sentiment for WTI and the WTI-Brent differential expected to widen further, further trim in the long positions in WTI might be seen.

Key Quotes

“With the exception of heating oil the speculative community exhibited a bearish stance towards the energy complex during the past reporting week. As prices for WTI dropped by $5/bbl for this reporting week the speculative community was seen cutting back on their net long positions by 24.2K contracts. This significant level of cutback was last seen in August ’14.”

“We believe that this bearish sentiment is driven by very high current levels of US crude inventory builds indicating an oversupplied market.”

“The Brent-WTI discount has widened out to its largest discount for more than a year. In absence of a lifting of restrictions on US crude exports, we expect continued inventory builds in the US.”

“In our opinion, better than expected Chinese factory activity data and low OPEC (Iraq) output levels in February and multiyear high refinery margins will offer temporary support to Brent prices in the coming week and thus risks widening the Brent-WTI discount even further. Hence we expect the speculative community to further trim their net long positioning in WTI.”