Crude Pulls Back After Rally on Escalating Middle East Tensions

Energy Update

/ by Blue Line Futures

Crude Pulls Back After Rally on Escalating Middle East Tensions

WTI Crude Oil Futures (July Future)

Yesterday’s Settlement: 68.15, up +3.17 [+4.88%]

The sharp rally in crude oil yesterday was due to the risk-premium being added to futures contracts. Iran canceled nuclear talks with the US in the morning. By afternoon, word came that the US had ordered the evacuation of government officials from Iraq, Kuwait, and other areas in the region.

Iran then announced that they were pushing ahead with a new uranium enrichment facility, and that if US talks failed, they were prepared to strike US military bases and infrastructure in the region.

The settling of a US-China trade framework was also announced in the morning, buoying a risk-on move. The trade framework calls for the lifting of export bans by both sides, with the US resuming exporting AI chips and China resuming exporting rare earth materials.

US total tariffs on China have returned to a 55% level (10% Baseline, 30% New, 15% Existing) while China’s tariff on US imports has returned to 10%.

Yesterday’s weaker-than-expected CPI report increased the probability of a Fed rate-cutting cycle. A monetary easing cycle will likely bring investment flows back into commodities.

Today, WTI Crude Oil is lower by -1.11 [-1.63%] to 67.04

Crude continued to rally sharply in the overnight session as news broke that Israel was planning to strike Iranian nuclear facilities and infrastructure, which led to the US evacuations in the region.

Prices began to fade with no immediate strikes occurring in the overnight hours. Traders will be on edge into the weekend as geopolitical risk continues to ramp.

Data Releases:

Yesterday’s EIA report was as follows [thousand bbls]:

Crude: -3,644 vs -2,600 estimate
Gasoline: +1,504 vs +753 estimate
Distillates: +1,246 vs +700 estimate
Refinery Utilization: +0.90% vs +0.00% estimate
Technical Analysis:

Futures failed at key resistance, the April 2nd gap lower on the overnight. The 69.42-70.00*** level will be a key resistance zone moving forward.

Prices rallied to this level quickly, and profit-taking is prudent at these levels. Our tilt remains bullish, but a position squaring up around the 69.42*** level is prudent. However, we strongly advise against shorting this market. In the face of the potential geopolitical risk this weekend, outright shorts (open-ended risk) carry significant risk.

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

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Futures trading involves a substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians, or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.

With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy, and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third-party application. Blue Line Futures employees use only firm-authorized email addresses and phone numbers. If you are contacted by any person and want to confirm your identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500

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