Crude oil holds firm despite mounting supply glut fears

The US-focused WTI crude contract, meanwhile, is trading approximately USD 1.50 below the upper end of its current USD 55 to USD 65 range. It remains supported by strong refinery demand, low inventory levels, and the disruption to Canadian production caused by ongoing wildfires. Market expectations for another weekly drawdown in U.S. crude stockpiles are also lending support. A notable factor is the situation at Cushing, Oklahoma—the delivery point for CME WTI futures—where inventories have dropped to a ten-year seasonal low of 23.5 million barrels, compared to a ten-year average of 35.1 million barrels. This tightness is helping to sustain elevated time spreads at the front end of the futures curve, reflecting robust near-term demand.

Despite these supportive factors, the broader macroeconomic outlook remains clouded. Uncertainty fueled by President Trump’s shifting stance on tariffs has intensified fears of a global economic slowdown, leading to increased short-selling activity. Some of this bearish positioning has come from macro-focused hedge funds using oil as a proxy hedge against weakening global growth.

According to the latest CFTC Commitment of Traders report, speculative short interest peaked during the week ending May 27, when managed money accounts held a gross short position of 257,000 contracts across the three major Brent and WTI crude contracts. This equates to more than 250 million barrels and marks the highest level in eight months—a level only briefly exceeded five times since 2020. Overall, as illustrated in the chart below, the net speculative position remains relatively muted at 226,000 contracts relative to a five-year average at 420,000 contracts, suggesting balanced sentiment.

However, total open interest—the combined sum of long and short positions—remains near a three-year high. This elevated activity from hedgers, swap dealers, and speculators highlights a high degree of market participation despite the ongoing rangebound price action, underscoring the broader uncertainty surrounding the near-term direction of the oil market.