The oil market exhibits subdued activity in early trading, following a second consecutive week of declines. Initial support stemmed from the U.S. administration’s tariff exemptions on select electronics, though subsequent uncertainty arose from indications that these exemptions may be temporary and subject to further, targeted tariffs. Concurrently, market participants are evaluating the implications of recent indirect U.S.-Iran talks, characterized as constructive with further discussions planned. ING commodity analysts Warren Patterson and Ewa Manthey suggest that continued progress in these talks could mitigate sanction-related risks within the oil market.
Speculative positioning data reveals a significant reduction in net long positions in ICE Brent futures. Speculators decreased their net long positions by 162,344 lots to 155,838 lots as of the previous Tuesday, driven primarily by long liquidation, with a minor contribution from new short positions. This represents the largest weekly speculative sell-off since at least 2015.
The observed weakness in oil prices appears to be impacting U.S. drilling activity. Baker Hughes data indicates a decline of nine oil rigs in the U.S. last week, bringing the total to 480. This is the most substantial weekly decrease since June 2023. Prevailing West Texas Intermediate (WTI) prices offer limited incentive for U.S. producers to expand drilling operations, and sustained prices at current levels may lead to further reductions in drilling activity.
