Residual Bullishness for Crude but Prices Appear Overdone

September 26, 2017 9:26AM CDT

With crude oil prices starting out the trading week with a rather sharp rally and trading at the highest price since the end of May, it would appear as if the market is buying into the prospect of an extension of the oil producer’s output constraint program. However, the market is also embracing the reality of expanding demand from China. Not surprisingly, the market is also focusing on the argument from OPEC that the world oil market is balancing, especially given a recent “pattern" of declines in US rigs operating as that could be hard evidence that US oil supply expansion is set to level out. Adding into the upward track in prices is the prospect that Russia is establishing closer energy ties and increasing exports to China, as that could leave prior Russian oil customers seeking other supply sources.

NOV Crude Oil: With nearby crude oil prices climbing back above the $52.50 level and the latest net spec and fund long in crude oil weighing in at 475,000 contracts, it might not take much in the way of further gains for crude oil to reach overbought territory. However, the market is still bullish, powering a breakout run up from congestion. Yesterday’s rally hit the 5180 target, but holds potential for additional rallies to 5260+/-. Any corrective congestion contained to the upper edges of yesterday’s run will remain aligned for rallies. Only a close under 5070 signals a topping turnover. 


Nov '17 Crude Light Daily Chart

Nov '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.