The first day back for most traders after the July 4th holiday did not disappoint those hoping for a tick up in volatility.  Energy futures wiped out half of the gains made during their 8-day win streak in a classic case of taking the stairs up and the elevator down.  A weak finish to the trading session left the charts with an outside down bar, which is a classic reversal pattern when the market makes a new high in a day, only to settle below the previous session’s low.  So, the stage was set for more selling, and for a couple hours after settlement we got just that, and then the API report triggered one of the biggest head-fakes in recent memory.

Either someone forgot to train their trading robot, or they made a very bad bet on the API report.  In the 1 minute of trading when the report was released, all of the big 4 futures contracts sold off heavily to reach their lows of the day by a wide margin, only to reverse course and move sharply higher.  WTI had a swing of 83 cents, ULSD moved 1.9 cents, and RBOB swung 2.4 cents all in 60 seconds.  Perhaps coincidentally, perhaps not, CNBC was running a story Wednesday afternoon on how trading algorithms are struggling to deal with the increase in fake news.    Anyone who thinks it preposterous that someone might release a fake commodity report in order to trick traders intent on front-running the market must have never seen the classic movie Trading Places.

As if the action on the refined products side wasn’t enough for one day, the EPA decided to give everyone a head-scratching read when they proposed their 2018 Renewable Volume Obligations, which are slightly lower than the 2017 volumes, but keep ethanol requirements up against the Blend Wall.  Ethanol RINs traded down to 70 cents early on in the day, back up to 75 cents when rumors of the announcement came out, only to trade back to where we started at 72 cents by the end of the day.  It’s worth noting that the EPA has changed its mind from its proposals to its final ruling in years past, so these targets are not set for next year.

A tropical depression has formed in the Atlantic and forecasts show it could be headed for the East Coast next week.  While forecasts are not calling for this system to become a hurricane, it may strengthen to Tropical Storm status at any point.  Another tropical wave forming over Africa is one to watch as it too may become the latest system in what’s predicted to be a busy year for tropical weather activity.

After Wednesday’s excitement, all eyes today will be focused on the DOE report due out at 10am central.  If the API figures are confirmed then maybe the advance off of the June lows can continue, but if they aren’t, we may be headed right back to those lows.

CLICK HERE for a PDF of today’s charts