RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

As of Thursday, the crude oil market is absorbing the news that there has been another attack near the Strait of Hormuz, the critical strait between the Persian Gulf and the Gulf of Oman. This has naturally led to stronger oil prices with the front month July futures contract trading near $52.10 Thursday afternoon, and as high as $53.45 today.

Comments from U.S. Secretary of State, Michael Pompeo, also noted previous attacks on tankers and pipelines in the region, especially in light of U.S. sanctions and the attacks coming against U.S. allies.

In addition to the implications for increased geopolitical turmoil, there are a number of implications from both a rate and inflation standpoint as well. Given the recent drop in oil prices which has led to lower inflation numbers and discussion of the further divergence between the Fed dot plot and Fed Funds futures, there are equal implications for a inflation and rates should things escalate, especially as further quota and productions cuts have been discussed in addition to today’s developments.

As seen below, barring a break below this month’s lows and a re-test of the lows of late 2018, some may argue a double bottom chart formation has been forming this June.  That being said, there is not much price action below current levels should the market take out recent support, which is actually closer to the current price than the high on June 10th.

Crude Oil Jun ’19 Daily Chart

Crude Oil Jun '19 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.