WTI crude oil:

May WTI crude oil closed at $100.26, which is above the key pivot point of 100.01. Although we think May crude oil will trade below it on Thursday, which would prevent a short-term buy signal, we wanted to make a couple of observations based upon the late rally that occurred over a 45 minute period from 1:15 p.m.-2:00p.m CDT.

During this time, May WTI rallied from a low of 99.79 to a high of 100.46. The volume during the 1:15-1:30 time frame was 13,132 contracts, which was the second-highest volume on the 15 minute chart for the entire session. In our view, this looks like short covering before the floor close at 1: 30 p.m. From 1:45-2: 00 p.m, the May contract rallied from 100.26-100.46, which was the high for the session on very low volume of 2,782 contracts.

As we said in this afternoon’s report, we have to be mindful of the support in WTI despite the weakness in Brent crude, heating oil and gasoline. Another factor to consider is that the market was able to close above OIA’s key pivot point in what could only be described as a bearish report released by Energy Information Administration on March 26.

Often, we have seen crude oil rally on Wednesday only to decline on Thursday. If crude oil does not decline on Thursday, then we will have to reassess the bearish positions recommended on March 12 and March 19. While we do not think that WTI crude is headed significantly higher from here, money management is of paramount importance and positions should be scaled based upon risk tolerance.

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