Crude oil prices strengthened on Monday as the weekend failed to bring any progress on reopening the Strait of Hormuz, though traders remain skeptical about the sustainability of the rally.
Net long positioning in crude oil saw only a modest recovery in July, and is now shrinking across various crude contracts. Investors are interpreting reports of President Trump's "low-key" approach and "semi-negotiation" strategy with Iran as a sign of a more cautious diplomatic path.
US economic data is also playing a role. Recent weak employment reports have dealt a blow to investors betting on the US economy outperforming the rest of the world. This week's CPI data is expected to show continued easing in core inflation, which would reduce the appeal of crude futures as a hedge against the risk of an early rate hike by the Federal Reserve.
The situation in the Middle East remains volatile, but with macroeconomic factors playing a diminished role in the crude market, the threshold for pushing oil prices back to March levels has become higher.
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