Crude Futures Choppy as Geopolitical Risk Escalates and Fed Decision Looms

Futures were volatile last week as traders weighed escalating geopolitical risk against recession fears and expanding OPEC supply. Saudi Arabia’s aggressiveness in the cash markets that we saw last week is something to keep a close eye on. The shooting down of a Russian drone in Polish airspace escalated tensions between NATO & Russia, something that’s likely to continue this week.

Over the weekend, Russian military drones entered Romanian airspace as the Kremlin ramped up their hawkish tone, saying that they are in a conflict with NATO. This week features the Federal reserve decision, which will jar loose some volatility in rates, equities and currency markets.

A cut is expected, but there’s a chance for 50bps over 25bps, which could be bullish risk assets. Inflationary pressures are still present but the labor situation has deteriorated rapidly.

Technical Analysis:

Despite all the bullish volatility we saw last week, futures could not hold out above that key 63.50*** we highlighted last week. The trend has been international buying on the overnights which has been met with heavy selling through the US session.

Futures opened Sunday afternoon higher around the 63.00 before selling off quickly back to the 62.50 level seen by Friday’s close. Buyers have steadily pushed prices higher through the overnight out above the opening range.

We’re playing crude tactically this week, and are taking high confidence buy / sell levels only. Unless we get a settlement out above 63.50*** it will be hard to pick a clear bullish / bearish momentum leader. We’re looking for a choppy, two sided trade this week..