WTI crude eyes key resistance

WTI crude eyes key resistance

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  Having spent the past three months rangebound within a 12-dollar range WTI crude oil is once again challenging key resistance in the $80 area, while Brent faces a steeper climb to its $85 resistance level. The alternating market focus seen in recent months helped create a very difficult trading environment with directional bets by speculators failing on several occasions, forcing trading positions to be adjusted on a regular basis, thereby triggering moves that found little fundamental justification. However, in recent weeks the market has been supported by ongoing Red Sea disruptions and emerging signs of tightness.


Having spent the past three months rangebound within a 12-dollar range around $74/b, WTI crude oil is once again challenging key resistance in the $80 area. Brent, similarly, confined around $79, faces a steeper climb to its $85 resistance level. During this time prices of both have struggled to gain momentum with geopolitical concerns and OPEC+ production cuts offsetting demand concerns, not least in China, the world’s top importer of crude.

This month has, however, seen a strong rebound, initially supported by fuel market tightness leading to higher refinery margins, or so-called crack spreads. Not least diesel prices which found support after global stock levels fell below their seasonal averages, supported by refinery disruptions in Russia amid Ukraine drone strikes, and not least continued attacks by Houthi on shipping in the Red Sea and the Gulf of Aden. The latter have led to the re-routing of east-west tankers from the Red Sea and the Suez Canal to the much longer route around Africa, in the process tying up millions of barrels of diesel and gasoil on the water for longer.

While some of that support has faded with crack spreads easing, crude oil has nevertheless managed to maintain a bid amid continued Red Sea worries and signs the crude market has started to tighten up. The alternating market focus seen in recent months helped create a very difficult trading environment with directional bets by speculators failing on several occasions, forcing trading positions, both long and short, to be adjusted on a regular basis, thereby triggering moves that found little fundamental justification.

However, in the latest reporting week to February 13, money managers showed an increased belief in higher prices, not least in Brent, the global benchmark, after they boosted their outright long positions to the highest level since October 2021 while the net position reached an 11-month high at 276k contracts or 276 million barrels. Positioning in WTI remains relatively weak with a net long at 116k contracts, some 44k contracts above a five-year low reached just before the Red Sea crisis began in early December.

The price difference between monthly contracts has been widening, indicating a more robust outlook across parts of the physical market. The three-month spreads shown above for WTI and Brent have both widened to around a $2 per barrel backwardation, highest since October, and up from a -$0.5 per barrel contango at the start of the year. In the short term, focus remains on the Red Sea where Houthi attacks continue while a Qatar attempt to broker ceasefire deal between Israel and Hamas has so far been fruitless. In addition, ahead of the OPEC+ meeting in early March, the group’s effort to trim output seems to be successful.

Overall, we maintain the view Brent and WTI will likely remain rangebound, respectively around $80 and $75 per barrel during the first quarter but with disruption risks, OPEC+ production restraint, and incoming rate cuts potentially leaving the risk/reward skewed to the upside. In the short term, the market will be focusing on WTI and whether traders will be successful in pushing the price through resistance just below $80, the result of which, could see it target $81.37 followed by $82.56.

For a closer look at the technical perspective for WTI and Brent, please check out this latest update from Kim Cramer, our technical analyst.

Source: Saxo

Commodities articles:

16 Feb 2024: Commodity weekly: Grains tumble; Industrial metals eye China boost
15 Feb 2024: US rate cut delay drives gold below $2000
13 Feb 2024: 
Video: What is driving Cocoa's sweet price
9 Feb 2024: 
Commodity weekly: Refined product strength lifts crude
9 Feb 2024: 
Podcast: Year of the metals
7 Feb 2024: 
Crude oil supported by tightening fuel outlook
6 Feb 2024: 
Gold and silver turn defensive on reduced Fed rate-cut optimism
2 Feb 2024: 
Commodity weekly: Tight supply adds fuel to uranium and cocoa rally
1 Feb 2024: 
Commodities: January performance and ETF flows
30 Jan 2024: 
Gold and silver look to FOMC for direction
29 Jan 2024: 
Video: Unpacking the reasons behind soaring coffee prices
26 Jan 2024: 
Commodity weekly: Back in black supported by China stimulus
25 Jan 2024: 
Grains up on short covering; softs supported by tight supply
24 Jan 2024: 
 Disruption risks drive specs into Brent; distorted EIA report up next
23 Jan 2024: 
Silver and copper in focus after recent declines
19 Jan 2024: 
Commodity weekly: Middle East, US rates, Bitcoin ETFs & Freight rates
17 Jan 2024: 
Natural gas focus switch from cold to milder weather ahead
16 Jan 2024:
 Data dependent precious metals continue their bumpy ride
12 Jan 2024: 
Commodity Weekly: Geopolitical risks lift crude and gold prices
9 Jan 2024: 
Q1 Outlook – Year of the metals
5 Jan 2024: 
Commodity weekly: Bumpy start to 2024
4 Jan 2024: 
What to watch in crude oil as 2024 gets underway
4 Jan 2024: 
Podcast: Crude oil and gold in focus as a new year begins

Previous "Commitment of Traders" articles

19 Feb 2024: COT: US inflation surprise drives broad selling of metals
5 Feb 2024: 
COT: Speculators chase false crude break; grain short extends further
29 Jan 2024:
 COT: Squeeze risks after funds sold into rising commodity markets
22 Jan 2024: 
COT: Commodities short-selling on the rise amid China woes and Fed caution
15 Jan 2024: 
COT: Grains sector slump continues; Mideast risks lift crude demand
8 Jan 2024
COT: Weakest commodities conviction since 2015
18 Dec 2023:
COT: Crude long hits 12-year low ahead of FOMC bounce
11 Dec 2023: 
COT: An under owned commodity sector raising risk of an upside surprise in 2024
4 Dec 2023: 
COT: Speculators add further fuel to gold rally

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.