Market Talk | Petroleum Futures Catch Their Breath

It’s a quiet start to end the week with petroleum futures catching their breath after a breakout rally. Most contracts reached nine month highs in Thursday’s session, finally erasing all of the record-setting losses that took place this spring. For WTI, Brent and ULSD, barring a large selloff today, this will mark a sixth consecutive week of gains that have added roughly 40% to prices since the overnight lows set on November 1.

There’s not much news to drive the price action this morning. We will get to see OPEC’s monthly oil report Monday, and the IEA’s on Tuesday, but just as we saw from the EIA’s report this week, any forecasts are subject to elevated levels of uncertainty due to the unknowns surrounding COVID. For now, it seems that the energy bulls are content to climb the “Wall of Worry” and shrug off the slowdown in demand and building inventories that are taking place across most of the U.S.

Although the correlation between currency movements and energy prices has been relatively weak for some time, the threat of a “No Deal” Brexit seems to be creating some negative sentiment that’s spilling over into equity markets this morning, and may be contributing to the cautious start for petroleum futures as well.

From a technical perspective, there’s still room to run on the weekly charts. The March highs appear to be the next target on the weekly charts that would add roughly $3/barrel to crude and about a dime to refined products. The rally has moved several shorter term indicators into overbought territory, meaning we’re due for at least a short term correction in the next week or so.

A couple interesting reads from the WSJ this morning: