Trading | April 22, 2021

Looking to the Futures

Crude Retreats on Demand Woes

Key Points

  • Short-Term Oil Demand Returns but EV Transition Looms Longer-Term

Energy futures dropped for a second day in a row on rising concerns a global spike in Covid cases may curb demand. The rising optimism of only weeks ago has faded with infection rates on the rise again. Here in the U.S. and in the U.K. the progress made with vaccine rollouts picking up steam had led to easing restrictions and growing hopes of a quick return to normal. However, significant spikes elsewhere, particularly in India, have come to the forefront and renewed demand concerns. India is the world’s third leading importer of crude Oil and is in the midst of second wave with marked increases in confirmed cases. Any return to mandated lockdown measures and travel restrictions is seen as a direct hit to energy demand.

Additional factors leaning on Crude this week has been the rebound in the U.S. Dollar. The Greenback has been pounded this month and has help fuel the strength seen in energies. A sharp recovery on Tuesday encourages some selling in Crude, although the USD did level out yesterday.

ICE June US Dollar Index

Source: Intercontinental Exchange (ICE)

News reports of progress on the Iran nuclear deal negotiations has also weighed on Crude prices. Analysts project a deal with the West could lead to sanctions being lifted and Iran pumping more Oil on the global market. One positive this week has been news out of Libya indicating their state production capabilities being hindered by financial issues.

Weekly domestic stocks data also weighed on prices with Tuesday’s API data pegging U.S. crude stocks higher than expected followed by the EIA numbers released yesterday. The EIA measured Crude inventories at 493.0 million bbl, a build of 594,000 bbl. The market had been expecting a sizeable drawdown of -3.0 million bbl. Crude prices sold off following the higher than expected stocks. Gasoline data was more favorable with a slight build in stocks coming in smaller than anticipated. Distallates showed a -1.1 draw in line with trade expectations.

 

Technicals

The new lead June WTI contract (CLM21) has pulled back down from its recent venture over the $64 mark. Prices have settled back to the consolidation range wrapped around the $60 mark from the previous month. Support will be found at the 59.75 and 58.80 levels. Longer-term support sits below at the 57.29 consolidation range low. Rallies will find first resistance at 62.60 and 64.38 marks. The 14-day RSI sits at a neutral 50 reading.

 20-Day SMA     60.88

 50-Day SMA     61.29

 200-Day SMA   49.16

 14-Day RSI        50.20

 Implied Vol       36.25%

Contract Specs (CLM21)

 

CME WTI Crude Oil futures contracts trade on your StreetSmart Central platform under the symbol CL. If you have questions regarding futures trading at Charles Schwab please contact our Futures desk at 877-280-6040.

Trading Calendar Today

Jobless Claims 8:30 a.m.  ET

Existing Home Sales 10:00 a.m. ET

Leading Economic Indicators 10:00 a.m. ET

EIA natural Gas 10:30 a.m. ET