Major Short Squeeze in Crude Oil Futures

November 7, 2017 10:14AM CST

Crude oil futures prices have added an additional $3.90 of premium over the past two weeks since the technical breakout above $53.00. Once the January contract broke out above $53.00, it triggered more aggressive buying as traders raced to cover their short positions. Perhaps that was just the Saudis juicing up crude oil premiums as they attempt to take Aramco public? They do have the muscle to trigger that type of buying, it was just a matter of getting the futures price to pop over $53.00. Then on top of that, we get hit with a government crackdown and shakeup in Saudi Arabia to spike prices another $2.00 to start trading on Sunday evening into Monday. Now, we all know that a real bull market needs a steady diet of bullish fundamentals to sustain a rally. I think that the shock of the government shakeup is already fading and that the real supply side fundamental will return to the forefront. A natural retracement back to the breakout level at $53.00 is all I would expect at this time. We have to see how other news develops in terms of geo-politics, but barring any unforeseen event we should see prices dip back towards the $52.00 to $53.00 trading range.


Jan '17 Crude Light Daily Chart

Jan '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.