Today’s release of the EIA crude oil stocks report marks the end of this week’s inventory cycle. Amid the fallout from Hurricanes Harvey and Irma, inventory statistics have become the go-to fundamental metric for oil traders.
As always, the inventory releases bolster volatility and participation. My colleague Arslan has discussed how to trade the inventories and their impact on the market in-depth.
The Hard Data
The numbers are out, so let’s get to them:
Event Previous Projected Actual
API Crude Oil Stocks 2.791M NA 6.181M
EIA Crude Oil Stocks 4.580M 3.238M 5.888M
The stats each show a considerable build. This is often expected when refineries go offline as is the case in Texas right now. Currently, October WTI crude is trading around $49.00, up 70 cents on the session.
Perhaps the largest aspect of WTI crude oil futures is the pending rollover. We are seeing an increasing volume dilution between the October and November contracts, at a 2/1 ratio.
October WTI Crude Oil, Daily Chart
As you can see from the chart, the roadmap here is relatively simple:
WTI crude is in macro consolidation between $50.00 and $45.00
The 78% retracement of August’s range ($49.43) and the Daily SMA ($47.30) serve as the intermediate-term trading range. Until we break out of this area, we are in for more sideways action.
Overview: It can be a challenge to trade rotational markets. Without the proper strategy, aligning risk and reward is difficult. For now, I am taking a wait and see approach to WTI crude. Failure at the 78% level may set up an upcoming shorting opportunity.
The situation is fluid, so stay tuned. Until then, check out the trading signals here at FX Leaders for proven ideas to attack today’s markets.