The U.S. West Texas Intermediate Crude Oil prices extended losses today by a stronger U.S dollar, as optimism surrounding an apparent re-balancing of the market began to fade. This is following news of an increase in Iraqi production and a rise in U.S. oil rig count. The stronger dollar puts a toll on the price of oil as it makes it more expensive for other currency holders.
I think crude oil will continue to decline over the coming weeks with a stronger dollar tied to seasonal tendencies for the market to sell off this time of year. The rig count that comes out on Fridays at noon CST had its first increase in 7 weeks, which should continue to expand over the course of the month.
The oil market had been well supported over the past few weeks with growing support. This is due to the crude market being well on its way to further gains after data showed strong compliance from major producers with their supply cut agreement by OPEC. Saudi Arabia, along with a few other OPEC countries, made larger cuts in production to help meet the OPEC production goal. Some of the OPEC countries such as United Arab Emirates, Ecuador, and Iraq increased production a little bit.
The November WTI Crude contract was at $50.52 a barrel this morning, down $1.14 or about 2.17%.
Traders should look at selling call options today going out 2 or 3 months. I recommend looking for deeper calls with less premium so you have room for to trade out the volatility.
Crude Light Weekly Continuation Chart