Wild Action In WTI Crude Oil

Since Sunday afternoon’s electronic open, WTI crude oil has earned its reputation as being the “wild west” of the financial world. Back-to-back sessions of heavy volatility and extended ranges have been this week’s rule. At press time (11:00 AM EST), the dust has yet to settle and October WTI has plunged beneath $60.00. 

The action continues to be fierce in the global oil markets. Weekend drone strikes on Aramco production facilities in Saudi Arabia is the primary catalyst driving extreme participation to the markets. Traded volumes of the December WTI crude oil contract are once again on pace to eclipse 1 million for the session. In all honesty, I haven’t seen action this heavy in WTI since the Arab Spring of 2010.

As of now, the picture regarding Saudi Crude oil production is murky. The attacks on the Abqaiq facility resulted in 5.7 million barrels per day coming offline; there is still no definitive timeline for restoration of production. However, UAE energy minister Suhail Al Mazrouei has stated that OPEC has the capacity to fill the GAP in production. In addition, the U.S. has opened the strategic oil reserves to meet demand if necessary. So, at least in the short-run, a serious disruption to the crude oil supply chain should be avoided.

WTI Crude Oil Puts On A Show

There’s volatility and then there’s VOLATILITY. WTI is currently the latter, with intraday ranges blowing up during the U.S. session. The 30-minute price bar for 9:30 to 10:00 AM EST measured a massive 285 ticks ― a truly staggering range. 

Right now, the retracement is on for WTI crude. Here are the levels to watch for the remainder of the session:

• Support(1): 62% Spike Retracement, $57.58
• Support(2): Bollinger MP, $56.58
• GAP Area: $58.77 – $55.68

Bottom Line: The process of price discovery has a way of filling in GAPs. That is exactly what we are seeing today, with December WTI on the verge of testing the $58.77-$55.68 area. If this occurs, the 62% Spike Retracement is very likely to come into play.

For the remainder of the session, I will have buy orders in from $57.61. With an initial stop at $57.44, this trade produces 34 ticks on a 1:2 risk vs reward management plan.