WTI Crude Oil Futures (June Future)

Yesterday’s Settlement: 60.42, down -0.97 [-1.58%]

WTI Crude Oil futures fell yesterday as demand concerns continued to weigh, and JP Morgan released a starkly negative report. Weak demand projections will continuously weigh on these markets until an offsetting bullish catalyst emerges.

The key aspects of the JP Morgan report can be summarized by the quote below:

“There is an elevated probability that Saudi Arabia and other key OPEC+ nations might opt to accelerate planned supply increases at the upcoming May 5 meeting, potentially announcing an additional 400k b/d for June.”

If this report came to fruition, and OPEC+ accelerated supply hikes, the outlook would shift considerably bearish.

Today, Crude Oil is down -0.80 [-1.32%] to 59.62

Macro markets are trading sharply risk-off this morning with equities, treasuries, and metals markets all weaker. Copper has made an outsized move to the downside (-7%) and the commodity complex looks to be on shaky grounds.

Overnight, Chinese PMI’s printed weaker than expected which helped to jar loose this risk-off trade. US data continues to trend negative and inflationary numbers are looking hot. If inflation scares enough to the upside where the Fed appears handcuffed, a sharp risk-off move across risk assets looks probable.

Last night’s API was reported as follows [thousand bbls]:

Crude: +3,800
Gasoline: -3,100
Distillates: -2,500
Estimates for today’s EIA report are as follows [thousand bbls]:

Crude: -579
Gasoline: -1,427
Distillates: -1,714
Refinery Utilization: +0.15%

Technical Analysis:

WTI Crude Oil futures traded through and settled below support yesterday. The JP Morgan report is especially concerning as the chart and fundamentals are setting up for a run potentially back to the lows.

We remain neutral, but the JP Morgan report yesterday tilted us to the bear side. Big bank analysts often have access to behind-the-scenes information that others do not. And unless their analysts were misinformed, their bearish report is something to pay attention to.

Today, futures are trading down near our 58.29-59.00** support level. If this breaks today, a move to the lows appears imminent. While this level does look fairly attractive for a bargain buy, momentum is clearly in favor of the bears.

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

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