Yesterday’s close: Settled at 77.14, up 276 [+3.71%]

WTI Crude Oil Futures rallied strongly to end the day up close to $3. Front month Brent futures rallied 3.04 to settle at 81.09, cleanly tearing through the key 80 level. Hamas fired a barrage of rockets into Israel which heightened investor worries on the possibility of Israel striking Iranian oil assets.

Hurricane Milton strengthened rapidly into a Cat 5 hurricane, which for now has only shut-down one offshore rig but has the potential to shut more.

Traders also cited a Goldman Sachs note that was released. The note stated that algorithmic driven CTA’s could deploy as much as $40bln of buying in Brent and WTI futures if prices rise significantly. CTA’s alongside other speculators had amassed a record bearish stance before the latest wave of geopolitical tensions took hold.

China’s top economic planner held a press briefing last night to discuss economic stimulus policies which ended up disappointing markets. The briefing gave only broad brush-strokes of policy goals and no specifics.

Chinese equities and China-linked commodities, including Crude Oil, have all slumped in the overnight session. WTI futures are trading down -1.58 [-2.06%] to 75.53, while Brent is off -1.62 [-2%] to 79.30.

We reiterate the same call as yesterday, that we remain cautious in aggressively adding new longs around these levels but recognize that risk is currently skewed to the upside. If de-escalation efforts were to begin between Israel and Iran, a significant level of risk premia would be sucked out of the market.

WTI Crude Oil futures are off sharply from yesterday’s spike high, and it all comes down to rare major four-star support at 73.82-74.28. This level combines Friday’s gap settlement with the .382 retracement from yesterday’s spike high back down to the 66.33 low on 10/1, a day of historic volume. Unlike some rare major four-star support levels where the volume profile is so strong that we expect initial rejection of price action, this one more so would represent a tectonic failure. In other words, a close below 73.82-74.28 would signal a potential near-term blow-off top in Crude Oil. However, as long as price action holds above here, the bulls are in the driver’s seat.

Bias: Neutral/Bullish

Resistance: 76.17-76.60***, 77.14-77.25***, 77.67-77.70**

Pivot: 75.51-75.65

Support: 73.82-74.28****, 73.18***, 72.39-72.65***

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