03/17/2015 12:05pm CDT
Crude oil appeared to be showing signs of a bottom until last week when oil started to slide lower for several sessions in a row. So far today we have seen further follow through selling, but the market has bounced nicely off the daily lows. The US dollar continues to strengthen, supplies continue to build as producers appear to be storing oil and selling it forward in the futures markets and we continue to see a lack of any new geo-political news threatening supplies.
The ongoing talks between the US and Iran have left many with the idea that if they go well, more oil may flow out of Iran onto the world markets. I think it�s worth saying again Andrew Hall, a noted commodity trader, announced he has exited his bearish position in oil � while this doesn�t mean the market will start to rally, I do believe it is important to consider as many traders do follow him.
According to the most recent Drilling Productivity Report,there appears to be a change in the crude oil production patterns in three of the key oil producing regions: Eagle Ford, Niobrara, and Bakken. After seeing steady growth in these regions since 2009, estimates for March 2015 now suggest regional crude oil production declines in certain areas, thus having the potential to bring down supplies.
Short-term technical indicators are still oversold,in my opinion.The market looked to be basing until Friday�s break down below the contract low which is not exactly bullish. If the market is able to close above $45.50 area today basis May, then the market could still be in store for a small bounce higher.
I still like positioning for a possible upside move in oil but one must consider the downside as well. Using the proper strategy such as a call-fly-spread or bull call spread could help you take advantage of a move higher, futures traders should consider buying puts for downside protection and could consider selling covered calls. Please call me for more details if you would like to discuss some strategies.
If you'd like to learn more about futures trading or the energies market specifically, please contact Mike Sabo at 312-373-5248 or email@example.com.
May '15 Crude Oil Daily Chart
Source: RJO Futures PRO