In Another Technical Breakout To The Upside 2-15
We’re in another technical breakout to the upside for energy futures this morning after a strong rally Friday set the stage for WTI to break above $60 overnight, and for refined product to push through to new 13 month highs.
The last time we saw futures trading at these levels was just after Iran launched missiles at a US base in Iraq in January of 2020, sparking some calls for $100 oil. The highs set back then also happen to set the next layers of chart resistance and an upside price target as the rally continues.
Trading volume is light due to the President’s day holiday in the US. Futures are trading until noon central time today, then will halt until the overnight session starts back up at 5pm. Spot markets are not being assessed so most rack prices will stay steady unless this rally picks up more steam and forces suppliers to make a holiday change.
The rally in prices is welcome news for oil producers, and we saw the Baker Hughes rig count increase for a 12th straight week. As has been the case for much of the past few years, the Permian basin accounted for the majority of the change in drilling activity with 5 of the 7 total oil rigs added in that region last week.
Speculators are also happy to see this rally, as they’ve continued to add to net length in oil and diesel contracts, although they have reduced their bets on higher gasoline prices for a 2nd straight week. Net length in WTI is just a few thousand contracts away from reaching a 2.5 year high, and open interest in both WTI and Brent has grown rapidly over the past few weeks, in a sign that large funds are willing to make large bets that oil prices can continue moving higher even after a 70% rally in the past 3.5 months.
The new US Secretary of State announced Friday that he would be revoking the Houthi rebel’s designation as a terrorist organization, just 2 days after assuring Saudi Arabia the new administration would not stand by after the Houthi’s attacked a Saudi Airport. Some reports suggested those attacks played a big role in Friday’s strong rally, even though they happened on Wednesday.
Today’s interesting read: Why the rapidly changing global refining landscape means big changes are in store for shipping routes.