***ANALYSIS & LEVELS ROLLED TO MAY FUTURES

*** Bias shift to Neutral / Bullish from Neutral

WTI Crude Oil Futures (May)

Yesterday’s Settlement: 66.75 down -0.62 [-0.92%]  

Yesterday’s early morning rally was quashed by a Trump – Putin phonecall where the two leaders reportedly discussed ending the war and potential terms of a ceasefire. Putin has been amicable towards Trump, but turned down the ceasefire offer this morning with fairly insulting counter-terms.

Yesterday’s macro trade was largely risk-off in a more traditional sense, with equities falling and precious metals maintaining a bid. Gold has been the standout leader in the commodities space as de-dollarization and global ramp in fiscal stimulus continues to support the rally,

Today we get an FOMC decision, markets are pricing in close to 0% probability of a cut here, but chances of a cut in May are teetering. The Fed will likely acknowledge the global economic slowdown while also noting the continued strength of inflation.

The one wild card the Fed could play, in terms of rhetoric, is to discuss the significant lag effect that interest rate hikes and tightening cycles have. This would somewhat pin this economic slowdown on previous Fed policy and open the door to more easing.It’s a long shot, but signs of a more accommodative Fed would do wonders for the state of risk-sentiment right now.  

Today, May Futures are lower by -0.18 [-0.24%] to 66.59

This morning, Putin declined President Trump’s request for a ceasefire and instead agreed to cease attacks on energy infrastructure. Ukraine has increasingly targeted Russian in-country Oil infrastructure so the gesture is more than empty.

In conjunction with Middle Eastern tensions ramping, we are still in the camp that geopolitical risk-premia is underpriced in crude markets.

The macro environment is trading mixed to risk-on ahead of the Fed. Large money flow has been sidelined to some degree ever since the jumbled tariff rollout muddied the waters surrounding the potential U.S. macro economic situation. Hopefully, Powell’s familiar tone and rhetoric skews dovish and catalyzes the sidelined buyers to take action.

Last night’s API report printed bearish, with figures reported as follows [thousand bbls]:

Crude: +4,600 
Gasoline: -1,7100
Distillates: -2,150

If today’s EIA figure follows API, it’s not necessarily a bearish build in Crude. If products show draws as strong as the API did, it would be another week of well-above trend demand figures in the U.S..

Estimates for the EIA report are as follows [thousand bbls]:

Crude: +1,000
Gasoline: -3,000
Distillates: -500
Refinery Utilization: +0.00%

We’d also like to remind readers that a possible Trump – Xi summit in June is still in the works. The plan is reportedly for Xi to travel to the U.S. where they will both celebrate their birthdays together. Trump stated yesterday that Xi may be coming to the U.S. “very shortly”. Easing China tensions would be remarkably bullish U.S.-produced commodities, including Grains and Petroleum products.  

Technical Analysis:

***ANALYSIS AND LEVELS ROLLED TO MAY CONTRACT

***Bias upgraded to Neutral / Bullish from Neutral

May futures settled above our two-star support zone of 66.55** yesterday. And while trading lower again this morning, the selling has been relatively tepid. We remain fairly bullish in our short to medium term outlook and see value in May calls / call spreads.

Catalysts include robust U.S. demand, low global inventories, Middle Eastern tensions, and the repricing of the Russian – Ukraine situation if Putin continues to decline a ceasefire.

For intraday trading, our pivot and point of balance is set at….

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