WTI Crude Oil Futures (March) 

Yesterday’s Settlement: 72.62, down -1.15 [-1.56%]    

WTI Crude Oil futures moved lower yesterday on a stronger Dollar, tariff comments from Trump’s pick for Commerce Secretary Howard Lutnick, and speculation around the OPEC+ JMMC meeting next week. 

Before the Fed meeting at 1 pm CST, the Dollar followed interest rates higher. After the Fed meeting, the yield on the 10-year and the Dollar fell back close to unchanged on the day. Oil markets had settled before the conclusion of Powell’s press conference and did not show much of a reaction to the reversal in Dollar strength. 

Howard Lutnick stated that the tariffs on Canada and Mexico, which are slated to begin on Sunday, were not set in stone and could be reversed. Prior to these comments, the discount for Canadian crude had traded at a six-month low in cash markets.

OPEC+ meets on Monday for their monthly Joint Ministerial Monitoring Committee (JMMC). While decisions regarding production are not made at these meetings, market conditions and production levels are reviewed. There will likely be headlines surrounding the group’s discussion about Trump and his plans to boost American oil production. There is a chance that the group looks to defend their market share and price out any hope of increased U.S. drilling. Traders should be aware of that possibility.

Yesterday’s EIA report was mixed – showing decreased production alongside weak refinery runs and strong builds in Crude Oil and Gasoline while the Diesel (Distillates) complex showed strong draws. Distillate demand reported at a three year seasonal high. Figures are as follows [thousand bbls]:

• Crude Oil: +3,463 vs +2,186 estim
• Gasoline: +2,957 vs +245 estim
• Distillates: -4,994 vs -2,300 estim
• Refinery Utilization: -2.40% vs -0.80% estim 

Today, futures are flat, -0.02 [-0.03%] to 72.60  

The Fed kept rates unchanged at yesterday’s FOMC with a statement that featured more hawkish language than expected. But, Powell’s press conference eased fears around said hawkishness, leading to a market recovery. 

The macro environment is trading risk-on this morning, with equities higher alongside gold, silver and industrial metals. Treasuries are showing strength, and the Dollar is trading weaker, especially against the Yen, which is showing notable strength. 

Crude has traded sheepishly so far today. Since China is on holiday through Feb. 4th, this overnight trade is unsurprising.   

Technical Analysis:

March futures traded lower yesterday and settled below our major three-star support level of 72.97-73.24***. We’d like futures to retest this three-star level through today’s U.S. session before confidently calling the probabilities of the next leg. But if the trade through today remains weak, a test of the rare four-star support zone of 71.25-71.63**** is likely. 

We have more conviction for long positioning at our rare four-star support zone of 71.25-71.63**** than we’ve had for at least the past 10 sessions since flipping our Bias to Neutral. But, if price breaks this level with OPEC+ headlines behind it – things could get ugly fast to the downside. With tariffs slated for a Sunday start and the OPEC+ meeting Monday – next week is set up for a volatile trade.

Amplified volatility is expected next week, and traders should position and manage risk accordingly.   

For intraday trading, our pivot and point of balance is set at…..

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