Thus far in the U.S. session, WTI crude oil has traded sideways. Hurricanes Harvey and Irma have brought much anticipation to this market, greatly impacting price action. As my colleague Arslan covered earlier today, the EIA crude oil inventory numbers are out. Let’s take a look at the reports and break this market down.

Inventory Reports Are In

The Labor Day holiday moved our inventory schedules for this week. API came out yesterday afternoon and EIA this morning one hour belated. Here they are:

Event                                        Previous         Projected         Actual

API Crude Oil Stocks                  -5.780M             NA               2.791M   

EIA Crude Oil Stocks                  -5.392M            4.022M         4.580M  

With a majority of the Gulf Coast producers back online after Harvey, we saw a considerable build in stocks. However, the market is ignoring these stats in favor of speculating upon the fallout from Hurricane Irma.

Technicals

The bulls have control of October WTI crude oil futures after last week’s proximity test of $45.50. As of now, it looks like we are going to test $50.00 before rotating back into the established value area between $47.00 and $48.00.

October WTI Crude Oil Futures, Daily Chart

A few key levels to be aware of:

• 78% of August’s range at $49.43

• Upper Bollinger Band at $49.62 (this will vary depending upon price action)

• Wednesday’s high of $49.42

• Pending crossover of the Bollinger Band MP and the Daily SMA

Bottom Line: Wednesday’s trade brought us a test of our 78% resistance level of $49.43. Moving forward, this market is poised to test $50.00. However, the path may not be easy as fundamentals surrounding the hurricane activity are driving this market.

Normally, I would recommend playing a clean break above resistance to our key number of $50.00. But, as we enter August’s established compression area from $49.00 to $50.00, there is likely to be a struggle.

For now, I am taking a cautious approach and will wait for an initial test above $49.50 to set up a possible position short or Fibonacci retracement long.