RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Energies

Oil Market’s Volatile Week

Posted 11/09/2017 2:45PM CT | Michael O'Donnell

As the week began, the oil market caught a bid amid the political tension in the Middle East, namely in Saudi Arabia. This included:

  • An intercepted missile from Iran over the airport in Riyadh, which has led to saber-rattling
  • A downed prince’s helicopter near the border of Saudi Arabia and Yemen where there is conflict
  • The detainment of numerous potential political adversaries of the Crown Prince to consolidate power

This led to a gap between this week’s open and last week’s close of $0.27 per barrel from $55.70 to $55.97. Some believe that gaps are frequently filled.

As bullish as this was to begin the week, Wednesday’s EIA Petroleum Status Report saw a build in inventories of 2.2 million barrels which may have been seen as a surprise by some or at least a change of pace from the previous reductions in inventory.

In reading The Gartman Letter and market quotes, one also notes that the Brent WTI spread has widened considerably in the recent weeks while narrowing less in previous days. It also notes that there has been a shift from being paid to store to oil being bid out of storage and that the consolidation of power in Saudi Arabia could be bearish for oil over the long term.

Also interesting to note in discussion with my teammate Eli Tesfaye, is the cost to mine Bitcoin in energy terms, a potential bullish factor to consider.

Technically, we can see these fundamental factors priced into the market efficiently, the weekend’s news and gap, the build in supply, and pause in upward momentum. Some technician’s may look for mean reversion and the gap to be filled or for a retracement or break in the sharp upward movement of late. Others could see a lack of resistance and a potential bull flag forming. Some may position with options for a number of scenarios.

 

Dec ’17 Crude Light Daily Chart

Dec '17 Crude Light Daily Chart

 

Dec ’17 Crude Light Daily Chart

Dec '17 Crude Light Daily Chart

 

Dec ’17 Crude Light 240 min Chart

Dec '17 Crude Light 240 min 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.