Yesterday’s Settlement: 70.99, up +0.39 [+0.55%]  

WTI Crude Oil futures settled higher yesterday and showed relative strength in the face of a macro-wide risk-off move. Equities and precious metals were sold sharply lower in the early part of the session yesterday while the VIX spiked sharply higher and bonds were bought aggressively. Crude oil, through this time, rallied to a high of 70.56 – prices last seen in the Feb. contract on November 7th.

Spurring the crude rally was the possibility of a Texas freeze, technical strength, and geopolitical risk. 

The macro-wide risk-off move largely came out of Europe and then was aided by money-flow-driven moves in the U.S. more so than catalyst-driven positioning as traders and funds rebalanced ahead of the End of Month, End of Quarter, End of Year trading session today.    

Today, futures are flat, trading -0.02 to 70.96

WTI Crude Oil futures were showing considerable strength once again this morning and have made a higher high of 71.74. Subsequently, prices sold off sharply to go unchanged on little news. This comes after a delayed CFTC report showed managed money length at a four-month high last night, a slightly bearish catalyst generally. Futures started trading sharply lower around 6:25 (resulting in a lot of revisions to this letter).    

Overnight, there was considerable jawboning and announcing out of the PBOC and Chinese leader Xi. The talk and policy announcement failed to impress Chinese risk assets as their equity markets sold off sharply alongside a drop in their bond yields. Despite the Chinese risk-off move, crude oil was showing relative strength, which has quickly faded.

Also, technically, we were starting to break out above our key three-star resistance zone at 70.82-71.21 but are now trading back inside this level.    

Something To Note:

While it hasn’t garnered much press, there has been another outbreak of conflict and violence in the middle-east over the past week. The Taliban (now the governing leadership of Afghanistan) and Pakistan have traded strikes this week within each other’s territory, with Pakistan reportedly killing over 50 Afghani citizens with air strikes. While neither nation is a major player of consequence within oil markets, we’re still watching this conflict out of the corner of our eye with some concern. Pakistan is a holder of nuclear weapons while the Taliban now has a considerable arsenal of ex-U.S. weaponry. This conflict has the potential to spiral.     

Technical Analysis

WTI Crude Oil futures are probing the highest level since November 7th and resistance aligns with the settlement and high from that day at 71.57-71.97. As price action has settled in, we will look for it to respond to key support at…

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