Crude Oil prices have been on their back foot for a slew of reason, we get you up to speed, breakdown some of the internals, and help you build a roadmap to tackle the price action.
Crude Oil (October)
Yesterday’s: Settled at 73.66, down 1.88
Crude oil fell for the fourth time in five sessions with WTI dropping $-2.21 (-2.88%) to $74.44 and Brent $-1.96 (-2.46%) to $77.72. Gasoline futures were lower by -4.34 (-1.92%) to 226.65, Diesel futures were lower by -6.04 to 226.84 (-2.59%).
Yesterday’s market sell-off was largely attributed to progress in Middle-East ceasefire talks and a siphoning of risk premia. Also, Libya’s Waha oil field returned to normal production levels today (300kbpd) after pipeline maintenance was completed sooner than expected. Weak Chinese demand and a bleak outlook for the world’s second-largest economy have continually weighed on demand prospects in Oil markets. Today, rumors were percolating that Chinese officials may finally be planning domestic stimulus – a much-needed catalyst across commodity markets – validation of these reports is yet to be seen.
By the onset of U.S. hours, Crude Oil had turned sharply from its overnight low, along with broad strength across commodities. Hopes of Chinese stimulus measures by the end of the week, along with comments out of Iran on a long waiting period before responding to Israel, have helped bring a tailwind.
While WTI markets are still in backwardation, spreads have weakened considerably. U-V closed the session -$0.46 lower to $0.65bbl, a level not seen since June 17th. Futures based crack spreads have continued their downwards trend with the rolling 2nd month 3:2:1 spread trading lower by ~$0.26bbl to close around the $16.90 level.
Refining cracks and calendar spreads present interesting opportunities to play a rebound in the oil complex.
Price action overnight responded to strong support at 72.20-72.59, aligning the closing lows from August 2-6. With Crude Oil on the mend, we are now watching the reception of major three-star resistance at 74.52-74.83, aligning the newly created .382 retracement with Friday’s settlement.