CTAs are approaching their effective “max short” positions in the crude oil markets – TDS

Commodity Trading Advisor (CTA) trend followers have hit crude oil markets in recent sessions, notes TDS Senior Commodity Strategist Daniel Ghali.

Oil bulls face supply challenges

“While algors only have a few bullets left to fire, CTAs are now approaching their effective ‘max short’ positions in the crude oil markets, with multiple consecutive whipsaws now diminishing the strength of the trend signals and in turn the size maximum.”

“However, crude bulls will have to contend with additional headwinds from supply risk premiums, which continue to drain from prices despite continued geopolitical risks and uncertainty over a Middle East ceasefire agreement. This is further corroborated by the decrease in propagation time.”

“The challenge for oil bulls now comes from the supply side, fueling fears that the OPEC+ group of producers is now caught between a rock and a hard place.”