Oil is Slipping to Bottom of Range

June 14, 2017 3:14PM CDT

Oil took a spill after the latest inventory report was released at 9:30am central. The EIA reported that domestic crude supplies fell by 1.7 million barrels, gasoline stockpiles rose 2.1 million barrels, while distillate stockpiles edged up by 300K barrels. The draw in crude was lower than expected, and more than offset by growth in gasoline. Market participants duly hammered the energy markets following the bearish report. Currently, July crude is down $1.73 (3.7%) at $44.73.

As noted in my last article, crude has been hemmed in a range of $45-$55, give or take a buck for the past year.  We are now at the bottom of the range, during what is summer driving season, and typically a high demand time period. The build in gasoline stocks over the past few weeks has caused doubt about the strength of that demand. 

With the information on hand, both technically and fundamentally, I think it makes sense to have some long exposure at this juncture. However, considering the market is telling us that there are doubts that OPEC cuts, and driving season will cut into supplies, it would behoove one to use a low risk strategy to get that long exposure. If the market continues upward, I would suggest to take a look at long call options with around 30 days left until expiration

 

Jul '17 Crude Light Daily Chart

Jul '17 Crude Light Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.