OIL: Crude Up On Friday, Canadian Oil Faces 10% Tariff
Oil prices finished Friday higher after a volatile day boosted by confirmation that oil imports into the US would not be exempt from tariffs.
- WTI rose 1.5% to $73.81/bbl, close to the intraday high, but was down 1.1% on the week. The benchmark rose 3.6% in January. It fell to $71.94 earlier in the US session. Initial support is at $72.25, 50-day EMA, while key resistance is at $79.48.
- Brent was 0.8% higher at $76.50/bbl after falling to $75.16 earlier. It finished January up 3%. Key resistance is at $83.28 and initial support at $75.46, 50-day EMA.
- A 10% tariff on US imports of Canadian oil, natural gas and electricity will be imposed, lower than the 25% for other goods. With over half of American crude imports coming from Canada, the move is likely to increase fuel prices. The API has said it will continue to work to have the sector excluded. Mexico is a major importer of US refined products and would also face higher prices.
- Bloomberg reports that almost all of Canada’s 4mbd of oil exports go to the US and around 500kbd from Mexico. President Trump plans to ramp up the US’ own production. Midwestern refineries are dependent on Canadian crude and refining rates may now be reduced.
- The impact on Canadian prices is unclear and will depend on how the tariffs are implemented, the oil sands maintenance season and the degree of diversion through the Trans Mountain pipeline to export to Asia rather than to California.
- Ukraine has been targeting Russian oil infrastructure again with a refinery hit on Friday. The amount of damage remains unclear but the Rosneft PJSC refinery struck around a week ago has stopped production.
- A US envoy met with Venezuela’s President Maduro which resulted in an agreement to release American prisoners and for Venezuela to accept the return of illegal immigrants. The talks open the possibility of a deal on its sanction-hit oil.
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Historical bullets
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
US TSYS: Near Late Friday Lows
- Treasury futures looked to finish near late session lows Friday, early support evaporating after the December manufacturing ISM survey beat expectations, but still pointed to soft if improving sectoral dynamics. The headline reading of 49.3 was an improvement from 48.4 prior and a 9-month high, besting the survey expectation of 48.4.
- Tsy curves bear steepened briefly before retreating mildly flatter in the second half. In turn, projected rate cuts through mid-2025 look steady to lower vs. this morning's levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.2bp (-14.4bp), May'25 -17.8bp (-19.5bp), Jun'25 -26.5bp (-28.2bp).
- Focus on next week: economic data and Treasury supply has been moved forward to accommodate next Thursday's "day of mourning" to honor President Carter. The Federal holiday sees most markets closed, the exception so far is CME rates that will operate on a shortened session.
- Next Thursday's weekly jobless and continuing claims will be released on Wednesday according to the Dept of Labor site LINK
