Short positions on crude oil up 140% last week; wait for prices to settle before taking fresh positions

After Saudi Arabia’s warning for short sellers, looks like they are coming in squeeze. Short sellers have piled on short positions as this week shorts were up to 148 million contracts, up 140% from last month on back of recession fears. On Thursday and Friday, crude recovered from 5590 to 5950 as shorters got a little nervous heading into the OPEC+ weekend, with new rumors circulating about the group’s discussions about another 1 million bpd in production cuts.

OPEC+ is scheduled to meet on June 4 and although, Russian Deputy Minister has said no production cuts is on the table, Saudi Arabia’s tone suggests that there might be some discussion of production cuts, as they want prices to trade above $78 to cover their fiscal deficit. The key reason why OPEC+ will continue to surprise with additional oil output cuts is simply that Saudi Arabia and many other OPEC countries need oil prices higher to survive and prosper. On Thursday, Reuters suggested that the OPEC+ group would be unlikely to deepen its production targets at the meeting this weekend.