There was a 6.5 million barrel build in U.S. crude oil inventories

Recap: The larger than expected 6.5 million barrel build in U.S. crude oil inventories sparked a length lightening sell-off in both WTI and Brent. WTI fell to a four week low, while Brent touched down at a three week low after the bearish inventory report, which coincides with this week’s bearish demand forecasts released by OPEC and the International Energy Agency. November WTI settled at $69.75 a barrel, down $2.17, or 3.02%, the lowest settlement for a spot month since September 2017. Brent for December delivery fell $1.36, or 1.67%, to settle at $80.05 a barrel, the lowest settlement for a spot contract since September 21st. November RBOB fell 3% to $1.919 a gallon, while November heating oil slipped 1.2% to $2.311 a gallon.

Technical Analysis: November WTI blew through $71.74, the 50% retracement and $70.52, the 62% retracement set by October’s high of $76.90 and September’s low of $66.57 and for the first time since September 10, settled below the 50-day moving average, which is currently set at $69.80. Wednesday’s outside trading session, followed by a lower settlement should lead to further downside movement. Support is set at $69.36 and below that at $68.29. Resistance is set at $70.52 and $71.74. 

Fundamental News: U.S. Secretary of State Pompeo said Wednesday that Saudi Arabia understands the need to conclude its investigation into the disappearance of Jamal Khashoggi in a timely and rapid fashion. He noted that the Saudis understand the investigation needs to be transparent and they have committed to holding anyone connected to any wrongdoing accountable. President Trump meanwhile said Wednesday he did not want to abandon close ally Saudi Arabia over the disappearance of the Saudi journalist and he needed to see evidence to prove the claims made by Turkey of his alleged murder.

Platts reported the talks between Saudi Arabia and Kuwait over the two shared oil fields in the Neutral Zone have broken down. Market observers had been expecting that the talks would have resulted in bringing to market some 500,000 b/d of production back onto the market. The two countries halted production from the area more than three years ago. Reuters reported that according to its unidentified sources the talks stalled over Saudi demands that they have greater control over the production fields. Kuwait and Saudi Arabia also are at odds over the Saudi led embargo of Qatar.

IIR reported U.S. oil refineries have 1.908 million b/d of refining capacity offline this week, some 104,000 b/d more than the previous week. They expect offline capacity will be reduced next week to 1.612 million b/d.

The U.S. EPA published a notice late Tuesday that said it aims to release its draft rule allowing year-round sales of higher ethanol gasoline blends by February and end deliberations on the proposal by May. Members of Trump’s cabinet were confident the new rule would be ready for the driving season next year, although some in the industry say that may be overly ambitious since legal challenges may be a possibility since some contend any changes require an act of Congress.

Early Market Call - as of 9:15 AM EDT

WTI - Nov $68.68 up $1.07

RBOB - Nov $1.8845 down 3.42 cents

HO - Nov $2.2858 down 2.53 cents