Oil Traders Slash LongsThe latest CFTC COT institutional positioning report shows that oil traders slashed their net-long positions by around 40k contracts last week, taking the total position down to 210k contracts from 253k prior. With this latest decrease, upside bets are now down by around 50% from the same time last year. The ongoing reduction in upside exposure highlights the demand fears crowding the oil outlook currently. However, despite the fresh sales, oil prices are holding at or above recent lows and have yet to make a fresh downward break.China Data Hits Oil SentimentCrude prices started the week on a soft footing in response to weaker-than-expected data from China. Soft consumer and industrial figures on Sunday have put fresh focus on recession risks in the world’s second largest economy. With the PBoC stepping in to offer further stimulus (MLF 0.10% rate cut), the market was caught between short-term relief and longer-run concern.USD Strength Weighing on Oil The renewed uptick in the US Dollar this week has also had a dampening impact on oil prices. With USD shrugging off the recent weaker-than-expected July CPI, the greenback has been back in demand this week as traders look ahead to the September FOMC. Midweek, a lift in core retail sales, along with a less-dovish-than-expected set of July FOMC minutes saw USD continue higher. The Fed reaffirmed its commitment to continuing tightening until inflation is back at target. The minutes were seen as something of a pushback against the idea of a “Fed pivot” and while USD continues higher, oil prices are likely to remain depressed.EIA Reports Huge Inventories DrawIndeed, even a noteworthy release from the Energy Information Administration yesterday was unable to provide a lift in oil prices. The EIA reported a massive 7 million barrel drawdown in commercial US crude stores last week. This was in stark contrast to the 0.3 million barrel increase expected and marks a significant shift from the prior week’s 5.5 million barrel surplus. Similarly, gasoline inventories were down by almost 5 million barrels, reflecting better demand over the recent period. With a stronger Dollar and global recession fears weighing, however, crude price have been unable to capitalise on the data for now.Technical ViewsCrude OilFollowing the breakdown through the rising trend line from Dec 2021 lows, crude prices have been grinding lower within a clear bear channel. The market has moved lower through several key supports and is now sitting on the 85.53 level. With momentum indicators broadly flat, a move either side is possible. However, should the current trajectory continue, a break lower towards the 79.21 level is the next anticipated move.