Supply vs. Demand in Crude Oil

January 18, 2018 2:33PM CST

As of Thursday afternoon’s trading, the March 2018 oil contract has seemed to pause within its appreciation which began in June and recently marked a 3-year high.  What makes this most interesting is that Thursday’s downward price action comes after a number of fundamental bullish factors, such as:

  • delayed Energy Information Administration number which showed a larger than expected draw in inventories
  • the return to production for a number of shale producers and corresponding estimates on output
  • record longs in the commitment of traders

Perhaps the pause in buying may be attributed to OPEC being quoted through their monthly report stating “Higher oil prices are bringing more supply to the market, particularly in North America”.  The same report also notes growth in supply in the US, substantially more than in the recent past.

Going forward, traders will be eyeing if the continued growth in shale production and supply leads to further selling or if new highs are tested amid global growth and demand.

Also, spread traders will note the front month contract bidding oil out of storage as it trades at a premium compared to further out expirations.

Crude Oil Mar '18 Daily Chart

crude_oil_mar18_daily_chart

Crude Oil Mar '18 60 min Chart

crude_oil_mar18_60min_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.