Crude Oil Rallies as U.S. Inventory Draw Outruns Supply Relief
November WTI crude oil futures are up sharply for the week through Thursday night. The gain did not come from one headline. The market has spent the week dealing with tanker attacks near the Strait of Hormuz, renewed attacks on Russian refineries, emergency stock releases and fresh talk of legal oil moving on previously sanctioned vessels.
The release and shipping headlines gave both sides of the trade something to work with. WTI got the stronger bid when the EIA reported a large U.S. crude draw. Brent held above $100 but could not add to its risk premium.
At 21:38 GMT Thursday, November WTI crude oil futures are trading at $97.58, up $5.92 or +6.46% for the week. The contract has traded between $89.61 and $98.32. December Brent crude oil futures are trading near $106 a barrel.
The EIA Report Put WTI in Front
The EIA reported that U.S. crude inventories fell by 8.6 million barrels in the week ended October 9. Traders had expected a draw of only 288,000 barrels.
Commercial crude inventories stood at 415.6 million barrels after the draw, still 3% above the five-year average. That is not a supply squeeze. But the market was not prepared for a draw of that size.
Distillate stocks fell by 2.5 million barrels and were 12% below the five-year average. Gasoline inventories rose by 3.5 million barrels. The gasoline build kept the report from being one-sided, but it did not change…
Crude Oil Rallies as U.S. Inventory Draw Outruns Supply Relief
November WTI crude oil futures are up sharply for the week through Thursday night. The gain did not come from one headline. The market has spent the week dealing with tanker attacks near the Strait of Hormuz, renewed attacks on Russian refineries, emergency stock releases and fresh talk of legal oil moving on previously sanctioned vessels.
The release and shipping headlines gave both sides of the trade something to work with. WTI got the stronger bid when the EIA reported a large U.S. crude draw. Brent held above $100 but could not add to its risk premium.
At 21:38 GMT Thursday, November WTI crude oil futures are trading at $97.58, up $5.92 or +6.46% for the week. The contract has traded between $89.61 and $98.32. December Brent crude oil futures are trading near $106 a barrel.
The EIA Report Put WTI in Front
The EIA reported that U.S. crude inventories fell by 8.6 million barrels in the week ended October 9. Traders had expected a draw of only 288,000 barrels.
Commercial crude inventories stood at 415.6 million barrels after the draw, still 3% above the five-year average. That is not a supply squeeze. But the market was not prepared for a draw of that size.
Distillate stocks fell by 2.5 million barrels and were 12% below the five-year average. Gasoline inventories rose by 3.5 million barrels. The gasoline build kept the report from being one-sided, but it did not change the WTI reaction.
The crude draw arrived while the market was already trying to decide whether emergency stock releases would cap the rally. It did not settle that question. It gave buyers a fresh reason to push the U.S. contract higher.
U.S. product demand has also stayed firm. Total products supplied averaged 21.1 million barrels per day over the past four weeks, up 2% from a year earlier. Gasoline demand averaged 8.7 million barrels per day. The distillate average was 4.0 million barrels per day, down slightly from a year earlier.
The U.S. report did not show every part of the barrel getting tighter. It showed enough tightness in crude and distillates to keep buyers interested.
Hormuz Risk Is Still Holding the Floor
The Strait of Hormuz remains the market’s biggest supply risk.
A container ship and a dry bulk carrier sank near the waterway Wednesday after separate projectile strikes. Iran said it was stepping up attacks in response to the U.S. blockade of its ports and tighter sanctions. The Saudi-Houthi conflict remains active, while Ukraine resumed attacks on Russian refineries with a strike on a plant in the Ryazan region.
Those events did not send Brent sharply higher Thursday. They did keep traders from treating the supply-relief headlines as a clean bearish trade.
Energy infrastructure has not been attacked in the past several days. That matters. The market is still dealing with shipping attacks, expensive diesel and higher freight costs, but no new direct interruption to crude production or major energy facilities.
The risk is not gone. It has stopped expanding for the moment.
Brent reflected that split Thursday. The international benchmark held the premium built into the market, but the new buying went into WTI after the inventory report.
Stock Releases Leave Buyers Unconvinced
The IEA agreed Thursday to accelerate the release of remaining volumes from the March collective action, including more than 20 million barrels of diesel as soon as possible. Countries had pledged more than 400 million barrels of crude and products in March. The IEA said about 330 million barrels have been released so far.
Spain said it would release 4.4 million barrels from strategic reserves in October. Traders had discussed a diesel release closer to 50 million barrels. The IEA delivered less than that.
The release is adding barrels. It is not changing the trouble around Hormuz or the pressure in diesel markets. European gas oil futures moved higher after the IEA decision, a sign that traders wanted more immediate supply.
The United States is also considering steps to ease restrictions on the global shadow fleet by allowing legal oil to move on vessels that had been sanctioned. The Department of Energy said the move would not help Russia move oil or petroleum products.
That did not stop traders from considering what the change could mean for tanker availability and freight rates. The talks follow the temporary easing of sanctions on Russian diesel fuel earlier this week.
More supply is the bearish argument. It has not been enough to take control of the trade.
Weekly November WTI Crude Oil Futures Technical Analysis
Trend Indicator Analysis
November WTI crude oil futures are trading sharply higher this week after recovering from an early-week setback. The mid-week turnaround created the momentum needed to overcome key retracement zone resistance at $94.28 to $96.02.
The main trend is up, according to the weekly swing chart. A trade through $101.69 will reaffirm the trend. Taking out $67.09 will change the main trend to down.
The minor trend is also up. A trade through $86.86 will change the minor trend to down.
If traders can build on the developing breakout over $96.02, we could see a test of the contract high at $101.69 early next week. If $94.28 fails to hold as support, my bullish outlook will weaken, making it vulnerable to a short-term pullback into $90.12 to $86.86.
Weekly Technical Forecast
The direction of the Weekly November Crude Oil futures contract for the week ending October 23 is likely to be determined by trader reaction to $96.02 to $94.28.
Bullish Scenario
A sustained move above $96.02 will signal the presence of buyers. This will put the market in a position to possibly retest the contract high at $101.69 if the headlines turn bullish again. Potential upside targets include $104.44 and $110.08.
Bearish Scenario
A sustained move under $94.28 will indicate that buying is slowing and selling pressure is increasing. If it creates enough downside momentum, then we could see a retest of $90.12. A trade through this level will send a strong signal that the rally is weakening, with $86.36 a potential target.
Friday Still Has a Say
WTI is carrying a strong gain into the final session of the week, but Friday can still change the look of the chart and the weekly close.
The crude draw, tight distillate stocks and unresolved Hormuz risk are keeping buyers involved. The IEA releases, shadow-fleet discussions and the absence of fresh attacks on energy infrastructure are keeping the market from turning into a straight-up panic move.
The week has not been about a shortage of headlines. It has been about which ones traders are willing to pay for. Through Thursday night, WTI has the answer.
Technically, keep an eye on trader reaction to $96.02 to $94.28. It is likely to set the tone next week with traders either aggressively taking out offers or passively bidding on the dips.