Monday August 1, 2016
The downward price action took a pause on Friday as morning weakness reversed and the energy market moved higher at end the day. Most of this increase was due to technical and simple statistics, as the percentage chance of seeing a seven day decline in any commodity or investment is very slim (before Friday we were down six straight days). However, overall the market has a very bearish tone. Hedge funds length, as reported by the Commodity Futures Trading Commission, continues to cut long holdings. Further the U.S. Dollar remains at elevated levels, which should weigh on commodities. The overall theme of ample supply continues to be a driving force, and something that will not be cleaned up overnight.
The Baker Hughes Rig count on Friday showed a small increase in oil rigs (3), with builds being the theme over the past several weeks. If the WTI contract continues to fall, it will be interesting to see if this trend changes going forward.