Yesterday’s close: Settled at 73.57, down 3.57 [-4.63%]

WTI Crude Oil Futures sold off sharply yesterday as overnight pressure from Chinese stimulus disappointment carried through the U.S. trading session. Selling accelerated yesterday at 8am cst as American traders entered the session.

Today, WTI futures are lower by -0.60 to 72.96. Last night’s API report (precursor to EIA report later today) showed the following (bbls):

• Crude: +11,000k
• Gasoline: -557k
• Distillates: -2,600k

Today’s EIA estimates (bbls):

• Crude: +1,600k
• Gasoline: -1,000k
• Distillates: -1,754k

If today’s EIA report prints a surprise draw with any significance, front month WTI futures and spreads may feel some upside pressure as domestic stocks remain tight.  

Selling in today’s session strengthened up around 5:15am cst when reports surfaced that Biden and Netanyahu are set to speak on Wednesday. Washington has been scrambling to deter Israel from direct escalation with Iran but this has seemingly fallen on deaf ears. Israel has continued to push forward aggressively on the military front and Netanyahu abruptly canceled his defense chief’s trip to Washington this week. Biden and Netanyahu have reportedly not spoken since August.

Israel reportedly hit 185 military targets on Wednesday and has mobilized another 5,000 – 10,000 ground trips for entry into Lebanon. Israel’s actions have not pointed towards de-escalation.

While the geopolitical situation remains on a knife’s edge, the technical situation of the crude oil chart is worrisome. As we warned in yesterday’s piece, a close below rare major four-star support level at 73.82-74.28 would signal a potential blow-off top. Yesterday’s settlement was 73.57, while the volume was tremendous and settlement was below the prior session’s low, we do not see this break decisive enough to solidify a blow-off top right here, right now. With that said, traders must be on the lookout for further weakness, and we have adjusted our Bias to outright Neutral. For now, price action has responded to our next shelf of support, but continued price action below 73.82-74.28 will open the door for a move down to major three-star support at….

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