The WTI contract hit a four-month high at $63.34 overnight before pulling back to the $60 to $61 trading range ahead of the Wall Street opening bell, while the SPDR Select Energy Sector ETF (XLE) rose 4% to a two-month high and is trading above the 200-day exponential moving average (EMA) for the first time since April. The narrowly focused SPDR S&P Oil & Gas Exploration & Production ETF (XOP) outperformed the broad-based fund, lifting nearly 10%.
Crude oil futures have posted their biggest one-day gains since the 1990s after a terrorist strike on a Saudi Arabian oil field shut down 5% of the world’s capacity over the weekend. Brent and West Texas Intermediate (WTI) contracts rose nearly 20% when world markets opened for the new trading week on Sunday evening and pulled back overnight in reaction to President Trump’s approval of a release from the U.S. Strategic Petroleum Reserve.
The oil shock will ripple through world financial markets until capacity is restored, which will likely take weeks or months, but volatility may be muted until Saudi Arabia outlines the full extent of damage and the time required to rebuild facilities. In addition, we can’t rule out a second attack because the perpetrators know the world’s excess capacity has been taken offline and may seek a more potent disruption.
Crude Oil Short-Term Chart (2017 – 2019)
WTI crude oil surged above the July high at $60.94 on Sunday night and pulled back through that level, reinforcing range resistance near the round number. Logically speaking, the buying spike did nothing to alter the mixed technical outlook because the instrument has been fully range bound since posting a six-month high in the upper $60s in April. The rally has lifted the contract just above the midpoint of that range, favoring neither bulls nor bears.