Are New Short Positions Building over Oil?

US crude oil last week

On April 18–26, US crude oil June futures fell 1.2% and closed at $63.3 per barrel. On April 26, US crude oil prices had the third-highest one-day decline in 2019. Profit-booking and concerns about President Trump’s demand for OPEC to raise the oil output and lower oil prices might be behind the sharp fall in oil.

Are New Short Positions Building over Oil?

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Are new short positions building over oil?

At 4:03 AM EST on April 29, US crude oil prices have fallen by $0.28 from the closing level last week to $63. If the current downtrend continues, on April 29, US crude oil prices might end at the lowest closing level since April 4. Oil exports are the lifeline to the Iranian economy. Iran is reluctant to lose its customers because of stricter US sanctions from the next month to other global oil producers. The fight for market share will likely lead to a fragile OPEC, which might have a negative impact on oil’s upside.

There might be new short positions on oil prices with a good risk-to-reward ratio. On April 26, US crude oil active futures were only 4.5% below the higher closing level in the last six months.

However, the ongoing conflict in Libya and US sanctions on Venezuela will likely support US crude oil near the psychologically important level of $60. The above analysis could be important for upstream stocks like ConocoPhillips (COP), Hess (HES), and Chesapeake Energy (CHK).