It looks like January crude oil futures have found a bottom near the $44.00 range. If you have read any of my other articles, you know that I like to point out that “it’s usually a level on the chart that reverses a market’s direction.” That is what we have now in crude oil futures. The market continues to be range bound from roughly $42.50 to $52.50.
The October rally in crude oil from $45.00 to $52.00 was largely due to OPEC indicating some agreement to freeze production and current levels of output. I myself am not completely convinced that an agreement will be reached to freeze or cut production by OPEC members. It’s not unlike waiting for the Fed to raise rates. Their credibility is at risk to say the least. However, my theory is that as the OPEC announcement due at the end of this month approaches, I expect traders to begin building premium back into crude future prices. The Saudis obviously have the biggest vote control in what OPEC decides to do as far as production goes. I think there is a chance, better than 50/50, that the Saudis will take the biggest hit in order to restore OPEC’s ability to affect price action in crude oil prices.
I think that crude prices are likely to move higher between now and the end of November.
Call me to open a futures trading account or to discuss strategies that are suitable for your account.
Series 3 Licensed
Frank J. Cholly
Senior Market Strategist
Frank brings his clients more than twenty-six years of commodity futures experience. He was a member at the Chicago Board of Trade for 10 years where he filled orders in the grain and financial pits. Frank was also a Lind-Waldock's floor manager for ten years and later joined on as a commodities broker.