*ROLL TO AUGUST ADVISED

WTI Crude Oil Futures (August Futures)

Yesterday’s Settlement: 73.27, up +3.02 [+4.30%] 

Crude oil rose sharply on geopolitical risk yesterday as Israel and President Trump balked at ceasefire talks. President Trump posted to Truth Social that “unconditional surrender” from Iran is required to stop strikes. Israel has made it clear that strikes will not stop until Iran’s nuclear capabilities are decimated. 

Two oil tankers collided and caught fire in the Strait of Hormuz yesterday, prompting Qatar to temporarily halt LNG vessel loadings. A blockade, attack, or shutdown of the Strait of Hormuz remains the #1 risk to oil, as 26% of the world’s oil is trafficked through the waterway.

While the collision was unrelated to the Israel-Iran conflict, it was likely caused by signal jamming in the region that has shut down some ships’ navigational systems. 

Geopolitical risk remains the core driver of Crude Oil, and possible US sanctions on Russia are lurking in the background.

 Today, WTI Crude Oil is higher by +0.34 [+0.45%] to 73.61

Iran hinted at unprecedented retaliation against Israel last night, driving futures higher in the overnight session. Other macro-economic factors would normally matter for Crude, but through this week, Israel—Iran will dominate price action. 

Iranian oil infrastructure has largely been untouched; if this changes, the price will likely make another leg higher above 75.00. Our key reads are Iranian oil infrastructure being targeted, any attacks or blockade in the Strait of Hormuz, and Russia’s deeper involvement in the conflict. These are the keys to the bull side. 

The bear catalyst would be the capitulation of Iranian leadership, which doesn’t seem likely.  

Last night’s API report showed a huge draw in crude oil inventories, and traders will be eying the EIA report for confirmation.  We also have the Fed today so buckle your chinstrap for some volatility. 

Data Releases:

Last night’s API report [thousand bbls]:

• Crude: -10,133 vs -600 estimate

• Gasoline: -202  

• Distillates: +318
  
   

Estimates for today’s EIA report are as follows [thousand bbls]:

• Crude: -2,500 estimate

• Gasoline: +1,116 estimate 

• Distillates: +1,000 estimate

• Refinery Utilization: -0.50% estimate

A potentially bullish EIA report is something to keep an eye on today.

Technical Analysis:

A trading range is starting to develop with a floor at $70.00. If we can punch above Sunday night / Monday highs of 75.50, momentum will likely escalate. Volatility is likely to remain extremely amplified. Risk management should be your first priority.  Taking on open-ended risk to try and short this market is cautioned against.   

Implied volatility in the options markets, especially the calls, has made risk-defined upside plays difficult, but we’re keeping an eye out for good deals on any liquidations. Capping upside risk on shorts is expensive, but it’s career insurance.

For intraday trading, our pivot and point of balance is set at…

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