RJO FuturesCast

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Energies

Crude Oil range bound or flagging?

Posted 12/21/2017 3:10PM CT | Michael O'Donnell

While this may sound redundant, crude oil continues to see the same range of trading as the past month, remaining for the most part in the $57/barrel range aside from brief dislocations with a $56/barrel and $58/barrel handle. 

It is interesting to note that since the passage of the tax bill and this week’s EIA report showing yet another draw in inventories, the market has been bid among the resumption of the forties pipeline and talks of Russia and Saudi Arabia possibly abandoning the OPEC production cut quotas in the future.

For traders looking to buy the rip and sell the dip, crude has likely been friendly with this range bound action and mean reversion and short term dislocations.  As we have previously noted, OPEC wishes to maximize price without bringing in too much competition from shale producers.  Some reports this week have noted the increase of shale production, which, when factored in with the prospect of increased global growth amid tax cuts and inventory draws, could favor the bull case, in addition to increasing uncertainty in Venezuela.  The bear case may note a reversion to the mean and increased range bound trading.

Those trading calendar spreads in the futures contracts have also likely noted the basis narrowing over the past month between the front month and further out summer months.

To discuss trade possibilities within this range or to position for a break out, please contact me at your convenience.

Crude Oil 240min Chart

crude_oil_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.