Crude Oil Holds the Line: Key Support Holds as Markets Weigh Tariffs & Ceasefire Talks

WTI Crude Oil Futures (March) 

Yesterday’s Settlement: 71.29, down -0.08 [-0.11%]

A volatile trade yesterday finished with Crude down by only 8 cents. Prior to the U.S. open, futures had made a low -1.15 lower to 70.22. Tariff threats, a hot PPI report, and a general risk-on trading environment helped push crude higher. 

Fundamental catalysts came alongside technical support, as the major three-star level of 70.53-70.64*** held firm. Our technical key to yesterday’s trade was a settlement above this level.

Trump announced some scant details surrounding his retalitory tariff plan yesterday afternoon. The details were vague and simple, stating that they would go on a country-by-country basis, imposing equal and opposite tariffs. The administration will incorporate VAT taxes and subsidies imposed or used by other countries into their “tariff” calculation. 

Trump has not indicated any desire to tariff Middle Eastern countries (Saudi Arabia). But it is something to be keenly aware of. The U.S. refines a large chunk of the world’s gasoline and diesel products, swapping out the refined products for crude oil imports. Trump has not targeted U.S. petroleum trade flows, but it’s something to keep an eye on. 

Today, futures are higher by +0.29 [+0.41%] to 71.58

Trump’s retaliatory tariff presser yesterday underwhelmed markets. Trade war risk-premium is being extracted from the Dollar which is sharply lower this morning. Bond yields are also moving lower after a Retail Sales figure that was much weaker than expected. Precious metals, specifically Silver, is showing considerable strength. Overnight, platinum and palladium moved sharply higher but have been sold back into the red.

Crude Oil has rallied into the U.S. open off the weaker dollar and hopes for reduced trade tensions. 

Technical Analysis:

Our technical key to yesterday’s trade was a settlement above our major three-star level of 70.53-70.64***, which was achieved. Futures are trading right in the meat of our next, major three-star level of 71.25-71.63***. A settlement above or below this level will give us clues as to the next leg.

With all of the headline risk out there, traders will likely pare positions into the weekend. Traders do not like going home short in this type of environment. But, with the prospect of a Russia – Ukraine ceasefire gaining steam, holding long positions through two days of headlines carries considerable risk as well. 

In this environment, we like intraday tactical positioning supplemented by risk defined option plays. Open-ended risk within this environment gets tough as the seemingly random headlines present significant risk either way.