Risk-On Flows Fuel Oil Rally — All Eyes on 63.81

WTI Crude Oil Futures (June Future)

Yesterday’s Settlement: 61.95, up +0.93 [+1.52%]   

WTI Crude Oil futures rallied off the backs of a global risk-on trade. Over the weekend, Chinese and US trade officials agreed to a 90 day pause in elevated tariffs in an effort to work out a formalized trade deal. Tariffs between both countries will be lowered to reasonable levels while the negotiations continue. 

The news drove equity and crude oil markets sharply higher as odds of a recession were lowered. 

Today, Crude Oil is up +0.81 [+1.31%] to 62.76 

The US-China trade deal is continuing to drive risk-on flows this morning, helping to buoy crude oil higher. A weaker-than-expected CPI print this morning is also helping to boost risk-on trade flows further. President Trump is visiting Saudi Arabia today and oil production levels are likely to be discussed.    

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. 

Added 5/12/2025: With an interim trade deal reached, the upside on crude is extended.Markets will now try and price in a revived Chinese economy after the trade deal and we’d like to see where price action goes through today.

Technical Analysis:

WTI Crude Oil futures failed at our longer-term pivot and point of balance at 63.53-63.81** yesterday but held support at 61.83**. Today, futures are trading higher and look to retest the 63.53-63.81** level. 

Recession odds are being lowered and risk-on flows are likely to continue. The strength of the US Dollar is something to keep an eye on as flows return to US assets.

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