WTI Crude Rebounds After Sharp Drop Amid China Sentiment and OPEC Demand Cuts

Yesterday’s Settlement: 68.04, down -2.34 [-2.34%]

WTI Crude Oil futures fell sharply yesterday on weak Chinese economic sentiment and continued dollar strength. The Trump trade is also weighing on price, as commodity market tourists position for a “drill baby drill” attitude in the coming administration.

So far, Trump’s cabinet appointments have featured China hawks, including staunch protectionist Robert Lighthizer as the U.S. Trade Representative. Chinese equity markets fell close to -1% after the announcement of Lighthizer. Other Chinese hawk appointments include Mike Waltz as National Security Adviser and Marco Rubio as Secretary of State. We remain hopeful that a trade deal will be cut with China, but the cabinet appointments made thus far signal anything but.

Early this morning, OPEC cut it’s oil demand forecast for 2024 by 107k bpd, the fourth consecutive month of demand cuts. OPEC’s demand forecasts have been considered too high by market participants for some time, and the cuts may garner headlines but don’t come as too much of a surprise. Demand was cut after Chinese and African imports came in lower than expected.

December futures are higher by +0.67 [+0.98%] to 68.67 as we enter the U.S. session. The US Dollar index is higher by +.322 [+0.31%] to 105.869 this morning and the metals complex is markedly weaker.

{Intraday Chart; US Dollar Index}

WTI Crude Oil futures made a low of 67.75 overnight around 11:30pm CST. From midnight through European open price action rebounded to make a high around the 68.80 level around 5:35am CST. Yesterday’s sharp move lower tore through the rare 4 star support level at 69.32-69.74 and the 70.00 flat price level at 3am on light volume. Our pivot and point of balance is set at 68.98, the Sunday night gap-open level set on the 10/28 trading session after Israel’s weaker than expected strikes on Iran. If price can get close above this level (68.98), momentum in the short term may favor the bulls.          

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