Oil took a spill after the latest inventory report was released at 9:30am central. The EIA reported that domestic crude supplies fell by 1.7 million barrels, gasoline stockpiles rose 2.1 million barrels, while distillate stockpiles edged up by 300K barrels. The draw in crude was lower than expected, and more than offset by growth in gasoline. Market participants duly hammered the energy markets following the bearish report. Currently, July crude is down $1.73 (3.7%) at $44.73.
As noted in my last article, crude has been hemmed in a range of $45-$55, give or take a buck for the past year. We are now at the bottom of the range, during what is summer driving season, and typically a high demand time period. The build in gasoline stocks over the past few weeks has caused doubt about the strength of that demand.
With the information on hand, both technically and fundamentally, I think it makes sense to have some long exposure at this juncture. However, considering the market is telling us that there are doubts that OPEC cuts, and driving season will cut into supplies, it would behoove one to use a low risk strategy to get that long exposure. If the market continues upward, I would suggest to take a look at long call options with around 30 days left until expiration.
Jul ’17 Crude Light Daily Chart