WTI Crude Oil Futures (January)

Yesterday’s Settlement: 68.37, up +1.17 [+1.74%]

Yesterday, WTI Crude Oil futures rallied off our rare four-star support level of 66.88-68.92 to make a high of 68.88 around 9:30 am CST. Strong buying at the U.S. open pushed an already bullish overnight trade into the highs whereby price leaked lower on limited volume for the remainder of the day. The announcement of additional Chinese stimulus, both fiscal and monetary, alongside the shocking downfall of the Assad regime in Syria drove the overnight and early morning strength.

Chinese officials have announced the most aggressive economic stimulus package in over a decade. Monetarily, the PBOC will shift to a “Moderately Loose” stance from the previously held “Prudent” stance that has been held since 2011. Fiscally, the Chinese government will widen their budget deficit to 4% of GDP and inject funds into the country’s fledgling stock market and property sector (both cited specifically). Reportedly, China will source the majority of these funds from the issuance of ultra-long government bonds. Beijing has signaled that they have room to widen the budget deficit past this initial 4% level and China’s Premier Li Qiang stated they will use “every means possible” to boost domestic consumption on Monday.

Chinese equities have rallied over the past two days as policy announcements continue to be released. Ideally, the stimulus package will result in a longer-term sentiment shift towards Chinese and Asian risk assets. While a sentiment shift toward the Chinese economy would be a welcomed catalyst, we’d first like see this risk-on price action carry through for the rest of the week. At that point, we would begin building some confidence in said “sentiment shift” catalyst.

Today, WTI futures are lower by -0.15 [-0.23%] to 68.23 on limited overnight volume. The overnight low was 67.72 while the high was 68.42. Chinese stimulus and the ever-worsening geopolitical situation in the Middle East remain the core focus of oil markets.

U.S. CPI data is slated for release which may result in some pre-report positioning through today’s session. The macro environment is trading mixed to risk-on with Gold, Equities, and the Dollar higher while Bonds are weaker. The Dollar is strengthening off the back of a weaker Yen and Euro.

For today, our pivot and point of balance range is set between 68.05-68.16. Intraday resistance is set at 68.45 and followed by yesterday’s high of 68.88. Intraday support is set at 67.71, a break below this level with any conviction would put the bears in the driver’s seat until our rare, four-star support level of…

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