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James Hyerczyk
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Crude Oil
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed early Monday. Last week, they both closed higher for the first week in four, however, there has been limited follow-through to the upside.

The price action suggests that despite the higher weekly close, short-term traders see resistance ahead. The recent two-sided trade also indicates that the news may be balanced. This could mean a near-term sideways trade especially if daily volume continues to come in below average.

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At 0812 GMT, September WTI crude oil futures are trading $69.19, up $0.50 or +0.73% and October Brent crude oil is at $74.88, up $0.12 or +0.16%.

Traders are saying that carryover from Friday’s U.S. Gross Domestic Product report is helping to produce the two-sided trade. Bullish traders believe the 4.1 percent growth rate may lead to increased demand, while bearish traders believe the pace is unsustainable due to expectations of a weaker economy during the second half of the year due to the impact of the trade tariffs.

In other news, hedge funds trimmed their bullish bets on U.S. crude for the second week in a row to the lowest in nearly a month. According to the U.S. Commodity Futures Trading Commission, money managers cut their combined futures and options positions in New York and London by 11,362 contracts to 412,289 in the week to July 24. That was the lowest level since late June.

Additionally, U.S. energy companies added three oil rigs in the week to July 27, according to General Electric’s Baker Hughes. This was the first time in the past three weeks that drillers had increased activity.

Forecast

We’re looking at the possibility of a rangebound, two-sided trade on Monday if the news narrative stays the same.

Traders think that the Iranian sanctions have been fully-priced into the crude oil market. This is helping to underpin prices. Therefore, a softer tone from the U.S. regarding this matter or the granting of exemptions to some of Iran’s customers could lead to renewed selling pressure.

Also on the bearish side are worries over the U.S-China trade dispute. If both countries continue to dig in or either proposes new tariffs then prices could fall on expectations of weak demand.

Helping to underpin prices will be the continuation of the supply stoppage by Saudi Arabia on shipments through the Red Sea waterway.

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