Will Supply Disruptions Propel WTI Crude Higher?

WTI Crude Oil Futures (February)

Yesterday’s Settlement: 77.50, down -1.32 [-1.67%]

WTI Crude Oil futures moved lower yesterday on limited newsflow and technical factors. Bull markets must be fed daily, especially at technically overbought levels. A weaker PPI print and Israel – Hamas news aided to the selling as well.

The Israel-Hamas ceasefire meetings came through with positive news, with parties stating they had reached an agreement in principle.

Today, futures are higher by +0.87 [+1.14%] to 78.37

Futures are higher this morning on softer than-expected CPI print this morning. The USD is markedly weaker alongside sharply lower U.S. yields. Equities, gold / silver, and bonds are all moving sharply higher against the weaker USD and lower yields.

Traders are adding to rate-cut bets after the weaker CPI figure, and financial conditions are easing this morning.

In the background, serious supply disruptions are still in play for crude oil. Tankers are lining up along the coast of China and not being allowed to unload. Capacity constraints on the global tanker fleet is going to be an issue, and the costs of moving crude is moving sharply higher.

While we’ve shifted to a neutral stance in crude, the supply and demand situation is still favoring the bulls. It should also be noted that the Texas freeze catalyst is still in play as cold shots continue to roll into the forecast.

Technical Analysis

Futures moved lower yesterday in an orderly fashion, the supply and demand disruptions happening should scare away any aggressive short sellers. Again, while we have shifted to a neutral stance for the time being, we strongly caution against shorting this market unless done so in a risk-defined manner (puts, put-spreads etc.). The supply disruptions happening could turn this thing into a runaway freight train should any further issues arise.

The major 76.41*** support level remains the best level in which to attack this market from the bull side. We need to see futures consolidate above this level before comfortably shifting back to a bullish bias.

For intraday levels, our pivot and point of balance is set at 77.86, intraday resistance is set at 79.09 (yesterday’s high) and intraday support is set at…

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