crude oil

Oil Sector Rally Propping Up The U.S. Indices

Posted Friday, April 3, 2020 by
Shain Vernier • 2 min read

The action on Wall Street has been heavy as traders balance the books ahead of the weekend break. After the first two hours of trade, the DJIA DOW (-320), S&P 500 SPX (-35), and NASDAQ (-85) are moving in whipsaw fashions. At this point, it appears that a tepid three-day rally in WTI crude oil is keeping bearish sentiment from taking over the U.S. indices.

By far, the lead financial story of the day is another record-setting loss in American jobs. March’s Non-Farm Payrolls report came in at a whopping -701,000, shattering the expected -100,000. This downturn spiked unemployment back above the benchmark 4.0% rate to 4.4%. However, these figures were to be expected in the wake of the COVID-19 outbreak.

Oil stocks continue to show life following the early-week washout of $20.00 in WTI crude oil. Some of the big gainers over the past five sessions have been Halliburton (HAL, +20.11%), Occidental (OXY, +12.90%), and ExxonMobil (XOM, +11.07%). For now, the entire energy sector is hoping for a bailout and swift end to the Russia/Saudi price war.

A Three-Day Winning Streak For WTI Crude Oil?

2020 has been a dismal year for oil market bulls. A strong start quickly degraded as a price war and global pandemic posed unprecedented demand-side questions. For now, hopes regarding a Russia/Saudi deal and production cuts are propping May WTI up above $25.00.

May WTI Crude Oil Futures (CL), Daily Chart
May WTI Crude Oil Futures (CL), Daily Chart

Here are the key levels to watch in this market ahead of the weekend:

  • Resistance(1): Bollinger MP, $29.51
  • Resistance(2): Daily SMA, $29.94
  • Support(1): Psyche Level, $20.00

Overview: Three things are driving crude oil prices: a glut of supply, a pending U.S. government bailout of North American fracking operations, and the possibility of armed conflict in the Middle East. Over the past 48 hours, President Trump has suggested that OPEC+ production cuts and a “credible threat” from Iran are possible (Twitter). At this point, energy traders have taken the Tweets to heart and bid WTI north from $20.00.

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