RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Energies

Can Crude Collapse Continue

Posted 11/09/2018 7:35AM CT | Michael O'Donnell

As of Thursday afternoon, the December 2018 crude oil contract was trading under the $61 per barrel level near $60.65 per barrel, marking a nearly 21% drop from early last month due to a number of factors.  During the drop the market has considered such factors as:

  • New all-time record U.S. production, about 10% above the previous all-time high and closely matched by Russia
  • Iranian exemptions
  • A strong dollar buoyed by today’s FOMC statement for further gradual increases
  • A deceased refinery utilization rate amid refinery turnaround season
  • Weeks of consecutive inventory increases and inventories above the 5-year average for the first time in many months

These fundamental factors are seen technically below with the market taking out the 200 and 100 day moving averages and an oversold level on the RSI.

Looking ahead and to outside markets in the energy complex, weather could play a factor, should there be continued forecasts for cold weather, similar to the price action seen lately in the natural gas market.  There are also a number of factors to monitor such as gasoline demand and inventories, crack spreads, a slight uptick in the latest refinery utilization rate and a number of fundamental factors for distillates such as heating oil. Also on the horizon is the December meeting for OPEC+ and their corresponding decision for 2019 production and the possibility of a 2019 production curb quota.

Crude Oil Dec ’18 Daily ChartCrude Oil Dec '18 Daily Chart

Michael O'Donnell

Mike started his career in the markets on the floor of the Chicago Board of Trade as a trade checker for a local market maker in the Dow Futures pit. This led to interning with an independent introducing broker and going on to work with a number of market participants including: speculating clients, hedge clients, introducing brokers, futures commission merchants, commodity trading advisors, proprietary traders, trading educators, system creators, and a number of international financial market participants.