Crude Pulls Back as Strait Access Improves, But Volatility Looms

**Long-run continuous weekly chart shown above

Yesterday, news that India had negotiated some passage through the strait helped to ease futures early in the morning while President Trump comments later in the day sparked a further sell-off. President Trump made (again) optimistic comments about the conflict ending soon and alluded to the Strait being “ok”. The President’s tone hints at an almost complete victory while realistic details remain cloudy and scarce. I

It could be true, that the US is close to a near total victory, and that Iran’s ability to bomb the Strait has been dismantled. But, that would make our recent pressures on allies and “enemies” (China) to assist militarily a head-scratcher.

This morning, there is news that Iraq had successfully negotiated for passage of some ships with Iran which is helping to drive futures lower.

In the background, there is an increasingly dovish tone being echoed by Western leaders when it comes to Russian oil sanctions. The West has eased restrictions and secondary sanctions upon Russian exports to Asiatic countries, and, more surprisingly, so has the EU for their own supplies. Quietly, the EU has attached riders on their military “aid” (see loan) to Ukraine that requires a re-opening and hiking of Russian pipeline flows into the EU. I.E. Ukraine doesn’t get the EU money unless they allow Russian energy to flow into the EU.

Coming into the Spring, if Russia cannot make progress on an offensive, Putin will likely be looking for an off-ramp. This dovish turn the West has taken towards Russia may be related to behind-the-scenes negotiations currently in progress. A Russia – Ukraine resolution is a bearish catalyst to lookout for.

Technical Analysis

Key levels for the rest of the week include 95.71-100.00*** on the upside and 91.85-91.27*** on the downside. A settlement out above that 100.00 range will likely push futures up towards the 111.00 level quickly. Volatility at that point would likely feature a resurgence.

A settlement below 91.27*** sets us up for a run back to 85.00 first, then toward 80.00.

Volatility will likely explode (once again) if we break this trading range. Directionally this could be in either direction, catalysts are binary, but probabilities and the chart do not favor an orderly consolidation within this 90 – 100 range.