WTI: Headline risk rises as positioning stays elevated - TD Securities

TD Securities’ Ryan McKay and Bart Melek note West Texas Intermediate (WTI) Crude prices are holding relatively strong despite intense headline risk and elevated speculative positions, with CTAs (Commodity Trading Advisors) adding back length rather than cutting exposure. They highlight a double-edged energy market where either higher refiner runs re-tighten Crude or increased flows cap the rally, leaving refined product prices to rise until demand destruction emerges.

CTAs add length despite headline noise

"Crude is prone to headlines amid elevated spec positions."

"The elevated flows through the Strait point to a loss of Iranian leverage, which suggests they could be more open to making a deal than previously, but it also increases the probability of escalation in an attempt to reassert control."

"We remain skeptical of any deal headlines until there is actually something concrete, but note as spec positioning becomes more elevated, the more prone the market is to the daily headline flow."

"We continue to see the current state of the energy market as a double-edged sword, as either increased refiner runs ease product market tightness but re-tighten crude, or the crude rally succumbs to increased flows without increased refiner uptake, leaving product markets to continue higher until demand destruction is found."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)