WTI Tests Key Support Ahead of Trump-Putin Meeting

Globe and Mail

15 hours ago

WTI Crude Oil futures finished lower yesterday despite a risk-on rally in US equities and the bottom falling out on the Dollar. President Trump has continued to voice a positive outlook towards his Friday meeting with Putin, adding to trader angst as a ceasefire and the easing of sanctions is possibly on the table.
Yesterday's CPI report was mixed. Inflation continues to be pesky, and the July report showed that pricing pressure was accelerating outside of tariff related goods. As these tariffs start to filter through more and more to the consumer, inflation will continue to accelerate (maybe), or, economic demand falls enough (stagflation). Globally, the economy looks to be at a do-or-die moment here. We still have no real clarity on tariffs moving forward – making things much more difficult.
Fundamentally, OPEC+ and the EIA released longer term estimates that were somewhat friendly. OPEC's demand projections came out much higher than their international counterparts (as is tradition). The cartel, along with the the EIA also pared back 2026 US crude production estimates as the US rig-count continues to fall steadily. Existing well productivity has also showed signs of peaking in the Permian this year which is not great for US oil. Saying 'drill-baby-drill' alongside outlandish plans does not increase US production. Crude up in the $80-90 range does. And the only way to prices back to those levels is from robust and accelerating global trade. At this point, that is a pipe-dream.
Today, the Dollar is once again seeing an outsized sell-off. Global confidence is eroding quickly in Dollar supremacy thanks to the continued attacks on the Federal reserve by the President. His statement about 'suing Powell' yesterday came alongside the idea of eliminating monthly Payroll Data. His latest appointment to the Fed board has started voicing radical ideas about reforming the Fed and the world is growing concerned.
The macro environment is fraught with risks and clarity is lacking across a lot of asset classes. A sharp risk-off move in US equities is something to keep a close eye on.
Attacking our central bank independence is not some limited consequence, hot-button social issue. There is significant risk to what he is doing. Attacking the Fed, while ramping the budget deficit, all while attacking our global trade and financing partners is taking its toll. The tectonic plates of the global monetary system are shifting, and if this continues, the ripple effects could get scary. Risk seems significantly underpriced across financial-assets, equities especially.
Technical Analysis:
Futures are trading into our longer-term pivot pocket and the picture is starting to look bleak. There is a probability that the catalyst we need will come out of the Trump-Putin meeting on Friday, but the rhetoric surrounding the meetup isn't pointing me in that direction.
Significant downside risk is in play if Russian sanctions are eased. Their country is starved for hard currency and oil flows will be the quickest / only way they can right-size their foreign reserve balances and buoy the restart of their post-war economy. If Russian exporters are allowed back onto the board, and their banking sanctions are lifted, they will likely flood the market rapidly. Scenario two is that the meeting goes very poorly and we toughen up on Russian sanctions, a considerably bullish catalyst.
Volatility looks underpriced. Shorter dated straddles look attractive through early next week. Generally, when my frustration levels hits this point, it's a sign a bottom is nearing.
Intraday pivot and point of balance at…
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