In view of analysts at TD Securities, energy markets are taking well to the latest increase in risk appetite with CTAs bringing WTI selling to a halt, and are set to cover a large portion of their shorts if today's gain can be held.
“Comments from Novak yesterday that Russia is worried about oversupply and potentially $40/bbl oil in the second half of the year has further strengthened our view that OPEC+ will agree on an extension to their production cuts. Meanwhile, global supply remains at risks amid the recent restriction of the flow of diluents to Venezuela, along with sky-high risks to Libya's output and boiling tensions in the Gulf, suggesting fundamental support remains.”
“In addition, CTAs continue to hold divergent trades in product markets as they sell gasoline and buy heating oil, which is a trade we like amid the coming IMO regulations which could substantially tighten the distillate market at the expense of gasoline in the later months of the year.”
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