Looking to the Futures

Crude oil futures (/CLX26) rebounded Wednesday afternoon after a five-day pullback from the September 15th high. The light sweet crude comes in at 92.45, up just over 2.10 percent on the day. 

Tensions remain high as U.S. and Iranian officials meet at the United Nations General Assembly in New York. United States President Donald Trump threatened to "annihilate" Iran if a deal is not reached while calling for the total economic isolation of Tehran. Iranian President Masoud Pezeshkian delivered a speech in response, accusing the U.S. and Israel of civilian attacks and terrorism.

Seven large oil tankers with the capacity to ship 12 million barrels of crude were spotted by the European Union's Copernicus satellite at Saudi Arabia's Persian Gulf export installations. The pivot to the Persian Gulf terminals comes after drone attacks damaged the East-West pipeline in early September. Since then, Saudi Arabia has restarted operations on the pipeline, though it could take weeks for the pipeline to return to full operational capacity. Saudi officials said August crude production fell to 6.238 million barrels, its lowest level since 1990.

The El Sharara oilfield continues to face a partial shutdown due to an armed military blockade. The military group closed Valve No. 7, a critical control point on the pipeline that allows crude to be carried to the Zawiya port. The Libyan state oil firm National Oil Corporation, or NOC, warned that "the continued closure of Valve No. 7 will inevitably halt production, transportation, and export operations at the Sharara field." Additionally, the NOC warned it may have to declare force majeure, which occurs when an uncontrollable event prevents a company from meeting its delivery obligations. Output has been reduced by roughly 200,000 barrels per day.

The EIA's petroleum status report showed supply exceeding demand, with crude inventories rising by 3.0 million barrels week over week after a 0.6 million-barrel decline for the week of 9/11. Total crude inventories came in at 426.4 million barrels. For refined products, gasoline inventories declined by 1.7 million barrels, while distillate inventories fell by 0.4 million barrels.

U.S. fuel price averages came in at $4.478 per gallon of gasoline, up $0.159 from a week ago and up $1.305 from the previous year. The national diesel fuel average came in at $6.529 per gallon, up $0.244 from a week ago and up $2.78 from the same time last year.

High fuel costs remain a driver of inflation as costs work their way into shipping expenses across supply chains. The CME's FedWatch tool now shows a 70.9% chance of the target rate increasing by 25 basis points at the next meeting on October 28th, up from a 55.4% probability on September 22nd. The potential for a rate hike does not stop there; the December 9th meeting now shows a 55.1% chance of raising the target rate to the 425–450 range.

Today we have the one-year, one-day chart of November crude oil futures (/CLX26). Volatility has defined trading since early March, as crude oil became a focal point amid heightened Middle East tensions. Crude quickly rose to a high of 119.48 on March 9th and has remained volatile since then. More recently, price moved up to a monthly high of 106.75 in September before pulling back to a low of 88.67 on Tuesday the 22nd. The RSI has pulled back toward the middle of its range, coming in at 48.50. Implied volatility came in at 54.74.

Fed's Barkin Speaks  8:00 AM ET

Jobless Claims  8:30 AM ET

Fed's Hammack Speaks  8:50 AM ET

New Home Sales  10:00 AM ET

Fed's Paulson Speaks  10:10 AM ET

EIA Natural Gas Inventories  10:30 AM ET

Kansas City Fed Mfg. Index   11:00 AM ET

7-Year Note Auction  1:00 PM ET

Fed Balance Sheet  4:30 PM ET

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