Crude Oil Holds Momentum Ahead of Powell’s Jackson Hole Speech

WTI Crude Oil futures rallied yesterday on a continuation trade from short-covering, a strong EIA report, and heightened pressure from the Trump administration on Russian crude oil buyers. White House Trade Advisor Peter Navarro took shots at India, criticizing their buying of Russian crude. President Trump also voiced concern yesterday that Russia wasn’t moving the ball down the field on the ceasefire, stating he would find different ways to deal with Russia if these talks failed. 

Also, yesterday we saw a big upside surprise in S&P Manufacturing PMI’s which helped to buoy crude. The heightened PMI figures were a sight for sore eyes in the manufacturing sector, which has struggled since COVID.

Today is the event we’ve been waiting for all week, Powell’s address at Jackson Hole. The speech is at 9am CST and will be keenly watched as participants try to gauge where he stands on September cuts. Macro driven volatility could be amplified, or the speech could be a nothing-burger; these things can be tough to gauge. Our house view is that Powell’s dovishness and September cuts are largely priced into markets, making the bar high in terms of Powell’s dovishness. Even a total middle-of-the-road Powell could result in Hawkish asset flows, in our opinion.   

Technical Analysis:

Technically, the WTI chart is looking solid. We got the settlement above 63.27*** yesterday, which was our key, and futures have continued to rally here in the overnight/early morning. But, we are heading into the weekend here, and taking outsized risk to the upside has resulted in a pretty painful trade throughout the back half of this year. 

This week’s flows look indicative of short covering. Negative sentiment on the fundamentals remains based on longer-term S&D outlooks. But, current supply & demand levels continue to run tight. Hope on a Russian deal is fading, and this market is working to reprice the Russian barrels that drove this market lower to start August….