Both Brent crude oil and WTI crude have returned to middle of their respective ranges that have prevailed for the past couple of months. The focus among traders continues to switch between price-supporting news from the US, where inventories and number of rigs are falling, and Opec, where several producers are pumping at record pace.
US oil rig count fell by seven last week
Other price sensitive pieces of news over the weekend has been Libya and Yemen. According to Libya News Agency the war-torn country has against all the odds managed to increase production to 500,000 barrels per day. In Geneva, U.N. Chief Ban Ki-Moon has opened Yemen talks with the purpose of seeking a ceasefire and withdrawal of armed groups from cities.
The expiry of July Brent crude today has also attracted some attention as the prompt spread between July and August has seen its contango widen to 0.80 cents which could be taken as a sign that oil cargoes with prompt delivery are still looking for a home. As a result of this pressure the WTI-Brent spread has contracted to $3.75, the lowest since April 15.
Brent prompt spread widening ahead of expiry today
WTI crude oil sees the expiry of July options on Wednesday and given the current large open interest at the $60 strike we could potentially see this level become the centre of attention until expiry.
Total open interest at the July WTI crude $60 strike close to 24,000 lots
Hedge funds cut the net-long futures and options exposure to WTI crude oil by 3.7% during the week of June 9. The conviction in both the bull and bear camps have been fading during the past couple of months during which time the price has remained range bound. The gross short positions is now close to the weakest seen since last August while the gross long has retraced half the increase seen from last December up until April.
Both bull and bear camp retracing leaving the net exposure stable
Outside markets events, particularly the continued uncertainty related to Greece and the FOMC meeting on Wednesday may also play its indirect part through the impact these may have on the dollar. The Greenback has, just like crude oil, been settling into a range lately from where it has struggled to break out.