Ironically, the floor price in crude Oil has likely declined as a result of the war. As long as the battle lines remain as currently drawn, downside pressures in crude Oil will grow regardless of whether the ceasefire holds or not: mutually assured economic destruction appears unlikely, TDS’ Senior Commodity Strategist Daniel Ghali notes.
Discretionary longs at risk in Oil markets
“Over the last sessions, estimated CTA flows printed one of their highest levels on record — algos sold a behemoth -50% of their max size in a single session. Now, CTAs will only sell an additional -5% of their max size below $64.45/bbl in WTI crude, and in fact we could see some smaller-scale whipsaws.”
“This suggests that the elevator-down leg of the sell-off has mostly completed, but at the same time, our advanced positioning analytics suggested that discretionary money managers were running long into the war, potentially pointing to additional scope for outflows. Supply-demand remains imbalanced, particularly after the summer months.”
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