It’s been a breakout week for March WTI crude oil futures. Prices have eclipsed $56.00, a level not seen in a year. At press time (2:00 PM EST), March WTI is pushing intraday highs, looking to extend its daily 104 tick range. Traded volumes have been strong, with around 275,000 March WTI contracts changing hands.

For the entirety of 2020, COVID-19 was the primary driver of the crude oil market. Spring saw a supply glut as lockdowns minimized demand; summer and fall witnessed pricing strength as many restrictions were lifted. If this pattern holds true, crude oil prices are due to spike upon a widespread economic reopening. When considering the following data, it looks like being long WTI crude oil isn’t a bad bet:

• U.S. COVID-19 Rates: Earlier this week, Johns Hopkins reported that U.S. COVID-19 daily cases and hospitalizations were down significantly. Although daily deaths held firm above 3,000, the contagion appears to be receding.
• U.S. Oil Production: Joe Biden’s initial flurry of energy-related executive orders appears to have already curbed American oil production. According to the EIA, the U.S. produced 100,000 barrels per day less in January 2021 than in December 2021. While not a huge drop, this is likely only the beginning of a politically-fuelled downtrend.

Add it all up: demand is due to increase and supplies-on-hand are headed south. Both of these issues have the potential to drive WTI crude oil to $75.00 per barrel by New Year’s Day 2022.

March WTI Crude Oil Futures Challenge 2020’s Highs

The March WTI weekly chart below gives us a good look at the bullish crude oil market. At this point, it’s hard to argue that American politics aren’t completely driving prices higher. Since the 3 November 2020 Election Day, March WTI crude oil has rallied from a low of $35.00 to a high of $56.33 ― a gain of 60.9%.

For now, there is one resistance level on my radar:

• Resistance(1): 2020’s High, $57.41

Bottom Line: If we see a test of 2020’s high in the near future, a short scalp may come into play for March WTI crude oil. Until elected, I’ll have sell orders in the queue from $57.38. With an initial stop loss at $57.56, this trade yields a fast 12 ticks on a sub-1:1 risk vs reward ratio.