Commodity Trading Advisor (CTA) trend followers have pummeled crude oil markets over the last sessions, Daniel Ghali, TDS Senior Commodity Strategist, notes.

Oil bulls face challenges from the supply-side

“While algos have just a few more bullets to fire, CTAs are now approaching their effective ‘max short’ positions in crude markets, with several consecutive whipsaws now diminishing the trend signals’ strength and in turn their max size.”

“Still, crude bulls will have to fight additional tailwinds from supply risk premia, which continues to seep out of pricing despite continued geopolitical risks and uncertainty with respect to a ceasefire deal in the Middle East. This is further corroborated by weakening timespreads.”

“The challenge for oil bulls is now coming from the supply-side, feeding into concerns that the OPEC+ group of producers is now trapped between a rock and a hard place.”