WTI Crude Oil Futures (March)
Yesterday’s Settlement: 74.62, down -0.82 [-1.09%]
President Trump continues to be the core catalyst for moves across global markets. Yesterday, speaking at Davos, his comments drove oil sharply lower mid-morning. The president’s off-hand remarks referenced OPEC production levels and how he’d like to see their production increase to lower U.S. oil prices.
The comments came shortly after Saudi Arabia announced they would be investing $600 billion, 55% of their country’s GDP, into projects based in the United States. Generally, when you write a check that large you attach some strings to your investment. I’d imagine moving forward, that comments out of the President regarding OPEC and their production levels will become few and far between. But this is speculation, and this president is unpredictable.
The president wants lower oil prices, a U.S. production ramp, an OPEC production ramp, large-scale investment from Saudi Arabia, and highly profitable U.S. Oil Majors. All four of those things are diametrically opposed to one another. The president will have to choose.
A bullish EIA report, which showed draws of over 1mil bbls once again, was an after-thought as markets focused on Trump. Global inventory levels remain low and supply remains tight.
Today, futures are lower by +0.38 [+0.56%] to 75.03
Yes, Donald Trump is moving markets once again this morning.
Last night, the President took a softer tone when talking about China tariffs. This drove Chinese equities sharply higher and is helping to move crude oil higher alongside it. His comments, alongside strong European and Japanese PMI data, are driving the Dollar lower this morning which is also aiding in crude strength.
Equities are trading soft while bonds are flat / weaker. The Dollar weakness is driving precious metals higher alongside crude oil and the commodity complex.
Technical Analysis:
We highlighted yesterday that our nearest conviction buy level was the 74.18-74.49*** zone. Futures have bounced off that level this morning and are trading higher.
If we settle above the aforementioned support zone today, it would signal a healthy and higher consolidation. This would be beneficial for the chart moving forward and signal a more sideways to higher trade is likely.
Yesterday, we remained neutral but noted that our tilt was leaning bearish. The Saudi’s played an ace yesterday with their $600bln investment that we did not see coming and will likely change how this presidency plays out. Our bias is leaning Neutral / Bullish at these levels while favoring the Neutral side.
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