• Brent Oil surges above $70 to hit new 3-year high
  • Price spikes higher but fails to close H1 candle above $70
  • COT data shows net longs increase once more

Oil bulls have enjoyed the past 6 months with a Brent experiencing a strong rally from the June low around $44  to above $70 a barrel this afternoon. Two extensions to the OPEC and non-OPEC supply cuts have no doubt helped to rebalance the market following the supply glut caused by the US shale revolution and persistent declines in US inventories suggest that this has happened to a certain extent. 

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 Brent Oil has made another new high today and is up nearly 60% in the last 6 months. Source: xStation

Having said that, the near 60% rally does look a little overdone and a pullback could be overdue. Extreme levels of positioning are present in several markets at present, and whilst few of these have shown reversals a sharp snapback could be lurking around the corner. In the case of Brent Oil, the most recent COT data has shown another rise in the net long position which has now set a new record as at its highest in the past year. 

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 Speculative net positioning in Brent Oil rose by 2% in the past week according to the latest data with the current level at its highest in the past year. Source: CFTC, Bloomberg and Saxo Bank

Today’s move has seen the market break above the prior high of 70.02 and in doing so negate a potential double top formation. The market has moved above its prior peak and is looking to build on its recent gains but there has been some selling pressure above $70.

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 Brent Oil has breached its prior highs but the move above 70.02 was met with some selling. Source: xStation