Can WTI Crude Sustain Its Rally Amid Sanctions and Tariff Speculation?
Crude is still being driven by the fundamental shift of the new Russia sanctions, and dips will likely be bought—will this shift push WTI past $80, or will resistance hold steady?
WTI Crude Oil Futures (February)
Yesterday’s Settlement: 78.82, up +2.25 [+2.94%]
WTI Crude Oil futures settled near five-month highs yesterday against a general risk-off macro backdrop. Equities and precious metals moved lower while yields and the U.S. Dollar strengthened for most of the day. Late in the session, a story broke regarding Trump tariff plans that reversed the risk-off sentiment through the close and into the overnight session. Further details are below.
The amplification of oil sanctions against Russia remained the core catalyst of the day yesterday and drove strength in the early morning. As we noted earlier in the week, the impact of these sanctions are significant.
Physical markets have been ripping higher as Indian refiners have now found themselves short at least 18 cargoes for the month of January alone. Chinese refiners are also snapping up cargoes at a clip – driving middle-eastern premiums sharply higher as Asian buyers have found themselves significantly net-short.
Calendar spreads, crude differentials, tanker rates, and more are experiencing significant volatility due to the cash market reactions to these sanctions.
Today, futures are lower by -0.57 [-0.76%] to 78.22
Yesterday afternoon, Bloomberg broke a story that the Trump administration is discussing a plan to introduce tariffs through a gradual and targeted process rather than an immediate blanket tariff approach. The impacts of immediate blanket tariffs would be significant, so the news is welcomed by global markets.The Dollar moved sharply lower while equity markets rebounded off the lows. The tariff news was the main driver of the overnight trade, with Chinese equities rallying 4%.
Crude is still being driven by the fundamental shift of the new Russia sanctions, and dips will likely be bought.
In other news, both Trump and Biden voiced optimism in regard to an Israel-Hamas ceasefire being signed in the coming days. A Middle-Eastern ceasefire would tamp down the sentiment and aggressiveness of this bull run.
A very weak PPI print this morning is moving equities higher and yields and the dollar lower. The December CPI print is slated for tomorrow morning.
Technical Analysis
With WTI Crude Oil futures trading up close to the $80, we are shifting our bias to Neutral from Bullish / Neutral. We have maintained a bullish fundamental bias for months, and monetizing this view and re-centering our outlook from here seems prudent and sensible.
Having said that, short positioning is not advised unless done so in a risk-defined manner. The forced buying that’s happening in cash markets could turn into panic buying quickly, and this thing could turn into a runaway freight train you don’t want to stand in front of.
For the day, our intraday pivot and point of balance is set at…
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