WTI Crude Oil Futures (January)
Yesterday’s Settlement: 70.02, down -0.27 [-0.38%]
WTI Crude Oil futures snapped a three-day rally yesterday, falling by -0.27 to settle just above 70. Chart-based selling weighed on futures and news-flow was limited outside of an updated IEA report.
The IEA reiterated their calls for a significant surplus in 2025 despite the OPEC+ production adjustment. The agency forecasts non-OPEC+ producers will add 1.5mbpd of production in 2025, with total world production growing by 1.9mbpd against demand growth of only 1.1mbpd (104.8mpbd Supply vs 103.9mpbd Demand = 0.9mbpd Surplus).
Today, futures are higher by +0.63 [+0.87%] to 70.63 on heightened geopolitical risk.
Early this morning, Russia launched a massive attack on Ukraine’s energy infrastructure that included over 200 drones and 90 missiles. It is being reported that at least one of the missiles used was of North Korean origin. The attack and use of North Korean missiles will likely result in more sanctions on Russia and their oil export industry.
Today’s macro backdrop is trading mixed to risk-on. Equities (outside of Asia) are trading higher, bonds are trading lower, and gold is lower. The Dollar is mixed, trading stronger against the Yen but weaker against the Euro. Yesterday we saw a significant sell-off in both gold and silver, that move is following through today.
Technical Analysis
While futures failed to close above our key three-star level at 70.42, they did hold the 70.00 mark which may help bolster some confidence. The Russian attack this morning has provided enough juice to push price back up above 70.42, making a high of 70.93 around 5:15 am. For intraday trading, our pivot and point of balance is set at 70.11, initial support at 69.25, and initial resistance at 70.72. If we can punch above the overnight highs at 70.93 at the U.S. open, today could get interesting for the bulls as the next resistance level isn’t until 71.24.
In the medium term, we’d like to see a settlement above 70.42 before initiating any new long positions. The chart is looking constructive, with today marking the 5th consecutive day of higher-highs and higher-lows. A consolidation at these levels would be healthy sign.
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