It’s been a good year for volatility in the oil market already. Crude fell nearly 10% at the beginning of the year and has now retraced more than half the decline, trading at $96.76.
I think US crude is in a longer-term bear market because of rising US/Canadian production and Americans driving less. The good news for oil is that February and March are historically the best months for WTI. Then again, there are still 7 trading days remaining in January.
The energy complex caught a boost today because of cold weather tightening supplies for distillates. A larger factor that could also tighten supplies is Wednesday’s opening of the southern portion of the Keystone XL pipeline. The delivery point for WTI is Cushing, Oklahoma and the pipeline will relieve oversupply there by bringing it to the Gulf coast.
Technicals are where WTI crude gets interesting. Today crude broke above the 55-day moving average for the first time since January 2. The bad news is that the 100-day moving average will fall below the 200-day tomorrow — a death cross. The 61.8% retracement of the early Jan fall is also resistance at $97.12.
WTI crude daily
At the moment, the trade is to wait-and-see how the technicals and fundamentals develop. There’s a case for shorts with a stop at the 61.8% retracement but a day or two of flat/lower trading would add confidence. The case for waiting revolves around Keystone because Texas refineries could ramp up demand from Cushing due to the new pipeline.