Crude Rebounds After Fed Jitters — Risk-On Flows Return

WTI Crude Oil Futures (June Future)

Yesterday’s Settlement: 58.07, Down -1.02 [-1.73%]

Yesterday’s EIA report showed bullish figures. A rundown and chart pack are available on our research portal, which is updated intraday with important news and research.

WTI Crude Oil futures fell after the Fed meeting tilted hawkish. Chair Powell voiced his concerns on tariffs and acknowledged the stagflationary environment the US is looking at moving forward.

A risk-off move dragged crude lower until the White House announced after the bell that curbs on AI chip sales to foreign countries would be eased. That headline, alongside an apparent trade deal with the UK, is helping to push risk-on flows this morning.

One bearish note from yesterday’s EIA report was the sharp rise in imports from Saudi Arabia. If this trend continues, it could be a bearish headwind.

Today, Crude Oil is up +0.90 [+1.55%] to 58.97

Markets are moving risk-on this morning with the announcement of a US-UK trade deal and the easing of chip export restrictions. Initial trade talks with the Chinese are set for later this week, while the S&P is back at major resistance levels.

The Dollar has consolidated off the mid-April lows and is trading higher for the second day.

Big bank research and price targets continue to be bearish, with Citi cutting its three-month forecast again today. Historically, fading Citibank commodity calls have been a premier trading strategy, but they’ve fired and replaced most of that department. We’ve noted that the sell-side would likely be against us on this bullish call.

Kazakhstan reiterated that it would not cut production for May, which was largely expected. Markets are already anticipating another +411k bpd hike at the next OPEC meeting, but we’ll keep a close eye on production levels and rhetoric outside the group.

Summary & Bias

Bias Summary from May 5th – 6th:

The bearish catalyst that has kept us sidelined has now been realized. As we turn our analysis forward, the environment is chalked with bullish potential catalysts. Because of this, we shifted our bias to Neutral / Bullish the morning of May 5th on the Sunday night ~4% gap lower in futures.

On paper, the forward-looking balance sheet looks oversupplied with accelerated OPEC hikes against a weaker demand outlook with the global economic slowdown we’re currently experiencing.

This will be the bear case, and it’s a valid case, but it uses somewhat lazy math. If you back out Iranian barrels, lower US production growth, and back out some Venezuelan barrels, the picture looks much different.

When you add some risk-premia for potential Russian sanctions and an escalation of the Middle Eastern conflict, you get to our bull case of the mid-60s level.

We can now add improving US-China dialogue to the potentially bullish catalyst list. The top end of our medium-term outlook is $65, and we like prudent profit taking around $62.50.

Technical Analysis:

Futures settled below our key support zone yesterday before the Fed press conference (1:30 p.m. CST settlement) but rallied once Powell took the stage.

We maintain our bullish bias at these levels, but today’s price action will be key to watch. Pressure from the sell side could be sizeable. Yesterday, Brent futures open interest hit record levels, which could signal strong end-user hedging.

There are still legitimate and institutionally popular theses to be bearish on Crude. Selling pressure will likely be apparent above $60. Futures may need to churn through some serious volume to break out above that mark. It’s important to remember that we are contrarians on the bull thesis here. The path upwards may not be smooth.

For intraday trading, our pivot and point of balance is set at..

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