As of 9:00 AM CST, March crude oil is trading at $53.64, up $1.24 up roughly 2.2%.  A  few headlines are driving the market this morning, the main one being Saudi Arabia reassuring that they will follow through with their pledged production cuts.  They are saying that they will cut production in March by 500,000 bpd more than they originally pledged. Another factor adding  fuel to this rally is optimism on a boarder security deal being made prior to the deadline. While this is far from a done deal, the tentative deal reached shows signs that even if there is a second government shutdown, that both sides are willing to compromise. Inventories are reported for API at 3:30 PM today and EIA tomorrow at 9:30 CST.  I expect these numbers to continue the rally to a psychological resistance level of $55.00.  Option expiration is on 2/14/19 with most of the open interest at the $55 strike, with a combined open interest on the puts and calls of 36k contracts.  I am a firm believer that on expiration the market price gravitates to the strike level of the most combined option open interest.  From the October highs to the December lows, we retraced 38% on the nose and pulled back.  I expect the price to at least test the 50% retracement mark just above $55, now that it appears a bottom has formed.  Support comes in at 51.77 and 51.34 with resistance at 54.54 and 55.68.  A break out above $55.23, I would expect a push to $58-59.

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Crude Oil Mar ’19 Daily Chart

Crude Oil Mar '19 Daily Chart

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Frank D. Cholly

Senior Market Strategist

Frank has been involved in many aspects of the futures business, from taking and placing orders to providing high-quality order execution service. As a second-generation participant in markets at the Chicago Board of Trade, Frank spent his early years working in the Treasury bond pit servicing both institutional and retail clients. He then expanded his brokerage duties and began covering a wide range of markets, including stock index, metals, grains and the balance of the interest rate sector. Ultimately, he turned his full-time focus to the grain market, dealing primarily with proprietary and commercial business. Frank was a senior commodities broker at Lind-Waldock prior to joining RJO Futures in 2011.

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