Looking to the Futures

Oil gains on Geopolitical Pressures

February 22, 2024 Tom Essig
West Texas Intermediate traded higher on Wednesday as a weak dollar and geopolitical pressures push on oil and energy.

West Texas Intermediate traded higher on Wednesday as a weak dollar and geopolitical pressures push on oil and energy. Sweet Crude Oil futures for April delivery, CLJ24, settled at $77.91 per barrel, up $0.87.
 

Crude prices have been supported by uncertainty of spillover from conflict in the Middle East. Israel is still actively waging war in Gaza and the Houthi's continue to attack commercial shipping lanes. The spillover from the conflict may be happening as the leader of Hezbollah stated it would retaliate after Israel killed civilians in Lebanon. The US is wary of further escalations in the region and has backed a UN resolution calling for a cease-fire in Gaza to de-escalate the rising tensions in the neighboring countries. 
 

Major shipping companies have been avoiding the Red Sea region due to continued attacks by the Iranian backed Houthi rebels in Yemen. The Houthi's have not had much success when attacking commercial ships but were recently able to damage a vessel badly enough to the point the crew abandoned ship. The rebels have been able to sustain their attacks as the US and UK retaliate through airstrikes.
 

It's been two years since Russia has launched its full-scale invasion of Ukraine and the energy embargoes against Russia are still in effect. Russia has found a way to circumvent those embargoes by trading with countries that are not participating in the sanctions like China and India. As reported by CNN, an analysis by the Centre for Research on Energy and Clean Air, India imported $37 billion worth of crude last year. These transactions were legal but were enacted by a fleet of ships being dubbed a "shadow fleet". 
 

This shadow fleet is designed to shroud its origins and destinations by using multiple ships to transfer oil between each other, then separate towards their individual destinations. The US and other countries participating in sanctions against Russia agreed to put a per barrel price cap for oil and oil products originating from oil in an effort to reduce Russia's ability to fund its war.
 

India's justification for purchasing oil from Russia was to keep global oil prices low by not competing for oil from the Middle East or other Western countries. OPEC+ has stated they have agreed to production cuts which are anticipated to last through June 2024, however, they left it to member nations to determine how the cuts would be implanted. 
 

The weekly EIA report came out today, with an increase of 3.5 million barrels in crude inventories, analysts were anticipating a rise of 3.75 million barrels. Gasoline inventories fell by 0.3 million barrels and distillate inventories fell by 4 million barrels. Last week's report showed an increase in crude inventories by 12 million barrels; a decrease in gasoline inventories by 3.7 million barrels; and a decrease in distillate inventories by 1.9 million barrels. 
 

Technicals

Sweet Crude Oil futures for April delivery, CLJ24, settled at $77.91 per barrel, up $0.87.
 

Oil is currently above the 50- and 200-day simple moving averages which is bullish for oil prices. The 50-day SMA is at $77.50, and the 200-day SMA is at $73.95.
 

The 14-day RSI is at 57.77% and chopping sideways. This type of move indicates uncertainty in trend and there may be a support or resistance that is forming.
 

The Directional Movement Index is positive to neutral. The ADX (white) is low indicating a weak trend. The +DI (green) is elevated but pointing down indicating a move to the upside is becoming weaker. The -DI (red) is low and pointing down indicating a bearish move may be weak. Overall, the price of oil is currently chopping sideways, as seen on the chart, trying to find a new trend. 
 

March 2024 Natural Gas Futures (NGH24) Chart

Contract Specifications

WTI Crude April Futures (CLJ24)

March 2024 Natural Gas Futures (NGH24) Specifications

Trading Calendar

Continuing Claims 8:30 AM ET
 

EIA Crude Oil Inventories 11:00 AM ET
 

EIA Natural Gas Inventories 10:30 AM ET
 

Existing Home Sales 10:00 AM ET
 

Initial Claims 8:30 AM ET
 

S&P Global Services PMI – Prelim 9:45 AM ET
 

S&P Global US Manufacturing PMI – Prelim 9:45 AM ET