Brent crude touched its highest level in nearly 14 years earlier today as news filtered through the market that the US is leading talks to ban the import of Russian oil and energy in a further attempt to tighten a fiscal noose around President Putin’s war in Ukraine. The ongoing supply shock, and the decision by OPEC+ to not increase production further last week, have seen oil on a one-way trajectory of late with little in the way of stopping the rally. The US is said to be approaching Saudi Arabia to increase production, while last week’s there were rumors that any Iran nuclear deal would also see additional supply hit the market.

A ban on Russian oil and gas imports would hit economies around the globe, with the EU likely hit the hardest. The single block imports around 27% of its crude oil from Russia, along with 46.7% of its solid-fuel requirements and 41% of its natural gas needs, according to 2019 Eurostat data. The European stock markets have been reflecting this risk in with the DAX down from Jan 2022 high of 16,300 to a current level of 12,580, while the French bourse is down from just under 7,400 to a current level of 5820 over the same time frame.

The monthly oil chart highlights the speed of this year’s move-in brent and how vulnerable the July 2008 high is. Moves of this speed should be treated with caution as even the best laid out and analyzed trade set-up can be run over by a rogue headline or rumor.

Brent Crude Monthly Price Chart - Monday, Mar. 7

(Click on image to enlarge)

If we look at US Crude Oil, IG retail trade data show 43.49% of traders are net-long with the ratio of traders short to long at 1.30 to 1. The number of traders net-long is 21.13% higher than yesterday and 5.36% lower from last week, while the number of traders net-short is 13.63% lower than yesterday and 28.83% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed Oil - US Crude trading bias.

What is your view on Crude Oil – bullish or bearish?