WTI Crude Oil Continues Its March To $60.00
Although 2021 remains in its infancy, the financial news cycle has been chock-full of headlines. Bitcoin at $50,000, the rise of the Reddit traders, and now $60.00 crude oil has stolen the show. Only 10 months ago, WTI crude oil futures traded at -$40.00 per barrel. Today, March WTI has posted an intraday top of $59.74 ― the highest level since 2018.
Of course, it’s important to remember that futures contracts aren’t continuous. During the COVID-19 oil plunge of April 2020, CME March 2021 WTI futures posted a low of $27.66. Based on that low, we have seen crude oil double its price in under a year. What is driving the action? There are two fundamentals at work:
- Supply & Demand: Since the spring 2020 COVID shutdowns, oil demand has consistently grown. However, there are serious supply-side questions, specifically from the United States. Last Wednesday, the EIA reported a 6.6 million barrel drop in supplies to a total of 469.0 million barrels. This brings stocks to a meager 2% above the seasonally adjusted five-year average. Factor in OPEC+ output cuts, and the crude supply chain is extremely questionable.
- USD Devaluation: Since the spike of March 2020, the USD has been on a steady slide. From that point, the USD Index is off 12%, consistently trading in the area of 90.00.
For 2021, crude oil prices are in a position to rise significantly from current levels. Given Fed QE, stimulus, and Biden-era oil production restrictions, $75.00 WTI by the 4th of July is probable.
Crude Oil Futures Test $60.00
It has been a while since both Brent and WTI crude oil prices have taken out $60.00. Brent has already eclipsed this threshold and March WTI isn’t far behind.
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Overview: In a Live Market Update from last week, I outlined a short scalp in March WTI from $57.38. The trade produced a fast seven ticks but fell short of the recommended 12 tick profit target. Fortunately, the drawdown was minor as a tight stop loss was used given the strong trend.
Right now, the sky’s the limit for WTI crude oil. A bullish bias is warranted and the long-term uptrend is intact.
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