Volatility through the end of the week is expected, and caution is advised

Crude rallied yesterday on increased geopolitical risk and a weaker dollar as the Israel / Hezbollah conflict intensified and traders awaited today’s Fed Decision. 

At the time of writing, WTI Crude Oil futures are down -0.54 to 69.43 this morning. 

Last night’s API print was bearish, showing a build of nearly 2mln bbls of crude stockpiles while showing a build in gasoline and distillates as well. The API report, which front runs the government-mandated EIA report, has been volatile in its usefulness as an indicator for EIA reports – but the print has been giving traders pause.

EIA estimates for today are as follows:

In the Middle East, Iran-backed Hezbollah has accused Israel of executing an attack inside Lebanon using exploding pagers. An Iranian envoy to Libya was injured in the attack, and the Israel situation looks set to escalate. 

The trade through the rest of the week will be dependent upon today’s Fed decision. Traders are split between a 25bps and 50bps cut to rates with probabilities favoring 50bps. If the Fed were to go 25bps, we may see dollar strength, which could lead to a bearish oil trade. Volatility through the end of the week is expected, and caution is advised. 

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