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Will a Blue Sweep be the End of WTI Crude?

1 January 2021

No, it wouldn’t… but it will raise production costs…now stick around for the important stuff. With a couple of days left to the U.S. presidential elections, the last debate – though the added mute button offered much less entertainment – did provide us with some revealing statements concerning Biden’s intent to transition away from the oil industry. Statements that could cost the presidential nominee Texas (among other states), with one poll showing Trump now on a narrow lead, after Biden was up by 3 points.

If you’re still scratching your head ( I definitely am)  around how the U.S. elections will impact the financial market, have a look at an article by our Chief Market Analyst, Rony Nehme. 

Back to WTI Crude, we believe that energy traders have much more pressing issues to deal with before frenzying about U.S. election results, and yes you might’ve guessed it, Coronavirus remains on pole (both it & Lewis Hamilton)

In a nutshell

Tighter restrictions in Europe and record daily Covid-19 cases in parts of the U.S. (wave 2 unleashed !?!), fable global demand recovery (i.e: the United States consumed 43% of last year’s Jet fuel, YTD August 2020 vs. YTD August 2019), growing supply gluts with Libyan oil production returning to markets and OPEC+ decision ( November 30th /December 1st) on whether to further relax production cuts by another 2 Mbpd from January 2021, should definitely top investor concerns when it comes to pricing WTI Crude.

Not to forget the elephant in the room, further U.S. stimulus relief packages will weigh heavily on markets and energy prices. However, further stimulus will not only depend on U.S. elections and the office of the President, but also on the House of Representatives and the Senate.

Aside from stimulus, both candidate’s much differing views on environmental policy, especially after Biden’s latest comments on transitioning away from the oil industry and towards clean energy (electricity sector 100% net-zero by 2035) will have lasting effects on energy prices and the industry as a whole.

Any Concrete Advice?

Back in July 2020 our view on WTI crude was “…WTI set on a short-term bullish run with $41.50 level needed to hold for any sustained upside. Failure to clear $41.50 level will favor a pullback with closest support area at $33.50”. How’s that for concrete.

If July seems too far, and before we get into our forecast, the below is a mash-up of our most recent short-term calls on WTI Crude.

Technical Outlook on Weekly Chart – simple and effective

As our July 2020 analysis remains on point, and as we are surely looking towards ending this week on a red candle, a close below $37pbl will confirm ongoing strong bearish momentum ( a close below $36.50 for the faint of heart) with $33.50 as major support target.

Karim Maalouf, Senior Market Analyst at SquaredFinancial

Karim started his career in financial risk at a top bank, but quickly developed a passion for high frequency trading. Enrolling in an algorithmic trading program helped Karim go through the learning curve of the fascinating world of trading under the mentorship of leading industry experts. Karim believes that deep education is essential before risking any money. He joined Squared Research in 2018 as an Equity Analyst, but continues to trade on a discretionary basis, using successfully developed methodologies coupled with effective risk management and a winning psychology. Karim obtained a Bachelors’ Degree in Economics from the American University of Beirut (AUB) in 2011, is FRM© certified with the Global Association of Risk Professionals (GARP) and is a Chartered Market Analyst (CMT) since 2017.




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