WTI Crude Oil Futures (February)

Yesterday’s Settlement: 73.32, down -0.93  [-1.25%]   

Yesterday’s session finished with Crude oil futures printing their worst day in a month and settling lower by over -1%.

We noted in yesterday’s technical section that we were shifting our bullish bias to a more neutral stance, and favored tactical profit taking within the mid 70’s handle as the technical setup had started to look a bit tired. Technical selling, especially out of Europe, seemed to be the main driver rather than any fundamental shift.  

Yesterday’s EIA report showed another strong draw in Crude inventories and dangerously low levels at the Cushing Oklahoma hub. Cushing inventories reported at 20.038mln bbls – right near the 20mln bbl minimum operating level required. Refinery runs also beat estimates and improved for the third straight week, marking a seasonal high not seen since the pre-covid era (2019). Refinery runs in the Midwest and Gulfcoast posted a record seasonal throughput. 
 

Crude draws also came despite imports from Canada hitting a record high of over +4.4mln bbls, as importers seemingly tried to front-run the Trump administration’s possible tariffs. Gasoline and Distillate inventories reported large builds which drove the product futures lower. Crack spreads have dropped precipitously over the past year and are at risk of moving below one-year lows. We will be watching these more closely at these levels. EIA results are as follows [thousand bbls]:

• Crude: -959 vs -2,000 estim
• Gasoline: +6,330 vs +500 estim
• Distillates: +6,071 vs +500 estim
• Refinery Utilization: +0.60% vs -0.50% estim

Today, futures are higher by +0.35 [+0.46%] to 73.66

The macro environment is trading risk-off this morning, with bonds stronger, equities weaker, and Gold, Silver, and Crude all higher. The dollar index is trading either side of unchanged but is stronger against most global pairs. Strength in the Yen is dragging the USD index today.   

VLCC prices (crude tankers) jumped this morning as tanker delays in the Gulf and biting sanctions have spooked markets on forward availability. Iraq raised its official selling price to Asian and European buyers this morning to capitalize on the lack of Iranian barrels in the market. 

Technical Analysis

In Yesterday’s technical section, we detailed our shift to a more tactical stance while prices were trading up around the 75+ region. While we remain fundamentally friendly, the mid-70 handle is a good target for profit taking and de-risking. Having said that, we still like attacking the market from the bull side on a more tactical basis.

Prices have consolidated nicely around the 73.13** level overnight which should provide decent support for a tactical long on an intraday basis. 

Our key yesterday was a settlement above or below 73.84**, with a settlement below signaling a chance for a run back towards the 72.62-72.43*** region. Yesterday’s sell-off was healthy, and we are now looking for prices to consolidate up above the 72.43-72.62*** region in a more sideways trade. We are using the 72.43 level as our key buy-spot target.

For prices to chew through the 75-75.35*** region and make another leg, buying volumes will need to be aggressive and sizeable. A healthy consolidation at these levels in a more sideways trade would be an ideal setup over the next few sessions as buyers are given a chance to de-risk and reload.

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

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