Oil market upside is driven by supply side risk. Meanwhile, the impact to oil supply from hurricane Beryl was less than expected, adding further downward pressure to the market, TDS Senior Commodity Strategist Ryan McKay notes.

CTAs sold 10% of their max WTI crude position

“Oil market upside was being driven by supply side risk and the rally was extended via Commodity Trading Advisor (CTA) buying flows.”

“However, we highlight that the risk premia associated with Middle East tensions tends to quickly erode without an escalation to a broader conflict, and with systematic flows hitting elevated long levels, the lack of persistent buying is likely to soon weigh on the market.”

“Indeed, CTAs sold roughly 10% of their max WTI crude position to start this week, and additional selling could take place should prices sink below $81.30/bbl.”