Looking to the Futures
Middle East Tensions Keep Crude Pumping
Crude Oil continued its surge on Thursday reaching 4-month highs off escalating Middle East tensions and the threat of supply disruption due to a potential U.S. attack on Iran. March expiration Light Sweet Crude Oil Futures (/CLH26) settled at $65.42/barrel, a roughly +3.50% gain for the day. Just this week alone, /CLH26 has swelled more than +7%. President Trump has voiced strong warnings this week that Iran should accept the terms to a nuclear deal or else face military strikes again from the U.S. He ordered ships be sent to the Middle East to be ready to carry out their mission “with speed and violence, if necessary” if Iran were to not agree on a nuclear deal. An attack on Iran, OPEC’s fourth-largest oil producer, could disrupt supply with many of the concerns being around the closure of the Strait of Hormuz, where roughly 20% of the world’s oil passes through. A weakening dollar, continued unrest between Russia and Ukraine, and winter storm disruptions in the U.S. have all added extended pressures to crude prices along with these heightened geopolitical risks in the Middle East.
The U.S. Dollar Index ($DXY) hit lows not seen since 2022 this week over concerns of economic policy and the continued parabolic rise in precious metals. A weaker U.S. dollar may help propel oil prices even further by making dollar-priced oil less expensive for global buyers. The Federal Reserve’s decision to leave rates unchanged on Wednesday and commentary implying they are in no hurry to cut rates further, has added additional weakness to the dollar. Metals have been on an unprecedented run which didn’t stop Thursday as April Gold Futures (/GCJ26) and March Silver Futures (/SIH26) closed higher after another volatile trading session, settling at 5354.8 and 114.429.
A potential peace deal between Russia and Ukraine was dismissed once again on Thursday by Russian officials as some key issues remain unresolved. Russia’s demand for territorial concessions in Ukraine and Ukraine’s unwillingness to forfeit this land unless security guarantees are provided has stalled recent talks. This continued conflict adds further strain to oil prices as geopolitical tensions and uncertainty broaden. U.S. brokered peace talks between the two countries are set to resume in the coming days in Abu Dhabi.
Over this past week, Americans endured severe widespread winter storms which disrupted crude output as well. It was reported that exports of crude oil from U.S. Gulf Coast ports dropped to zero on Sunday before rebounding back on Monday.
Wednesday’s EIA weekly report showed that as of January 23rd, U.S. crude oil inventories were -2.9% below the seasonal 5-year average and gasoline inventories were +4.1% above the seasonal 5-year average. It also stated U.S. crude oil production during that week was down -0.3% week over week to 13.696 million bpd.
Technicals
Looking at the daily chart for /CLH26, prices ripped up on Thursday and settled at $65.42. Prices closed their 3rd straight day above the 200-day Simple Moving Average and are trading well over the 20, 50, and 100-day SMAs as well. The 14-day RSI closed at 68.9681, indicating strong upward momentum and /CL sitting right below overbought levels. Volume on Thursday was the highest it has been since October 23rd of last year with 528,618 contracts traded. This volume was well above the 50-day average of 256,646. According to the Daily Hightower Report, /CLH26 may experience support at the 63.66 and 61.87 levels and resistance at the 66.85 and 68.27 levels.
20-Day SMA: 59.85
50-Day SMA: 58.86
100-Day SMA: 59.99
200-Day SMA: 62.17
14-Day RSI: 68.9681
50-Day Volume Avg: 256,646
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