If you witnessed the price action in WTI Crude last night, you’d think the entire market was perhaps in some nightmarish side-effects from an overdose of steroids! It wasn’t just Crude taking the rap from initial results pouring in showing Donald Trump leading in some of the traditionally “Blue States”, but it was the entire markets in general with the Dow Futures at one point being more than 900 points down almost looking like a flash crash. As the results poured in futures started dipping in and out, down some up some finally staying down for most of the Globex session.
Crude was on a death spiral of it’s own for no recognizable reason. While I’ve seen worse days in Crude Oil, I did not think a commodity future could behave so erratically from the top of about 45.25 where I was attempting to scalp and all the way down to 43.07 where it elected to crest and finally move back up in cycles. Then into the intraday it was almost like nirvana. All the misery from the previous evening was forgotten almost like a squabble between couples getting resolved with a hug and a kiss the following day.
Fundamentally, the news from EIA wasn’t entirely bearish as last week, with the Crude build under the API numbers from Tuesday and product inventories (distillate and gasoline) staying drawn. Under normal circumstances and had this not been a relief rally of sorts, I would opine that the inventory numbers given the uncertainty of OPEC agreement would’ve perhaps been bearish for Crude. Yet, we rallied past initial resistance to the secondary number I’d written about in my blog post from yesterday.
So where do prices go from here? Personally, I maintain a bearish outlook on Crude leading up to the end-November meeting. I don’t believe there is much enthusiasm here given that the new administration under Pres. Donald J Trump will perhaps be supportive of domestic oil exploration and production and self-reliance in Oil and the desire to boost that industry versus curbing exports. This should be bearish for Oil prices in the near term. For tomorrow, I am expecting Crude to retest 44.50 price area and perhaps revisit the low 44’s either in the Globex session or during the pit hours. With both swap dealers and producers being net short and OTP’s and Managed Money being net long, it will be a tug-of-war with prices as we approach the December contract expiration next week!