WTI Crude Breaks Out, EIA Reports Oil Supply Draw

It’s FED day and WTI crude oil has broken out to the bull. With Jerome Powell set to take the stage shortly, October WTI futures have returned to the vicinity of $40.00. Traded volumes are split between the October/November CME WTI futures contracts as energy players negotiate rollover.

Earlier today, the U.S. Energy Information Administration (EIA) issued its weekly oil inventory report. The EIA’s figure came in at -4.398 million barrels, far below projections (1.271 million) and the previous release (2.032 million). This lagging supply number has come as a surprise to the markets, driving October WTI crude north by more than $1.75 per barrel. The bullish action is a welcomed reprieve for energy bulls that have been caught up in the rough 2020 oil markets.

At this point, the big question facing WTI crude is whether fall seasonality will trump a weak USD. For now, it looks like traders are piling onto the dovish FED bandwagon. Both commodities and equities are trending higher as the markets bet that more QE and inflation are on the horizon.

WTI Crude Oil Spikes Above $40.00

Earlier today, October WTI crude oil futures broke above a key 38% Fibonacci retracement level. Now, prices are gaining steam above $40.00 and are in position to challenge another key technical area.

October WTI Crude Oil Futures (CL), Daily Chart

Here are two levels to watch as today’s session unfolds:

  • Resistance(1): 62% Macro Wave Retracement, $40.86
  • Support(1): Bollinger MP, $40.07

Overview: Be ready for volatility in WTI crude oil as the FED Announcements are made at 2:00 PM EST. Crude oil has been extremely bearish for most of 2020. If the FOMC alludes to eventual policy tightening or extreme long-term COVID-19 fallout, then this market is likely to close well beneath $40.00.

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