Crude Oil Takes a Break

August 22, 2016 9:30AM CDT

It appears that for the first time since August 10 th , crude oil will close lower on the day.  The October futures are currently down 3.5% at 47.38.  Oversupply has been a common theme ever since we bottomed out in February, but the market seems to have discounted the glut in inventory.  However, reports from Friday indicated that the rig count has once again increased.  That marks eight straight weeks of increases despite all the oversupply concerns that the oil bears keep referencing.  Also contributing to the selloff is news out China showing fuel exports have more than doubled since this time last year.

Part of what sparked the most recent leg up was the potential of a production freeze.  Saudi Arabia and other OPEC members are set to meet with Russia and other non OPEC producers to discuss limiting production next month.  While I can see that as reason for crude to catch a bit of a bid, very rarely are production freezes ever agreed upon.  In fact, the Nigerian oil minister mentioned last Thursday that he would be very surprised by any agreed upon cuts in volume.  The meeting is set to take place in late September in Algeria.

While I’m not really bearish crude, I do expect this slide to continue a bit further and that any rallies probably won’t overtake $50 by much if they even get that high.  I like the idea of taking in some premium on upside ratio spreads or buying futures at lower levels.

If you would like to discuss this further or any other commodity market opportunities please contact me at 800-669-5354 or at bdixon@rjofutures.com .

Crude Light Daily

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