RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Energies

Oil Volatility Aided by Florence

Posted 09/13/2018 10:31AM CT | Michael O'Donnell

The oil market this week has been largely affected by the forecast for Florence as the market was strong with anticipation for a category 4 hurricane which could affect pipelines and supply and demand.  The weekly EIA report Wednesday morning also showed a draw of 5.3 million barrels.

While anticipation of a category 5 hurricane coincided with the high of the week in the October contract Wednesday morning, since the storm is now a category 2 the market is down $1.75 as of Wednesday morning and making new lows of this writing at 9:30 AM central time.

This week’s price action and market participation offer a lesson in market reaction to weather concerns, as the fear and greed correlated with weather as well as supply and demand concerns may be overdone and subject to change with a changing forecast.

Also, for spread traders, moves between Brent and WTI as well as calendar spreads among different expirations offer a number of market relationships to monitor.

As noted previously, the market seems to sustain its uptrend while testing overheard resistance around the $71.30 level while channeling amid this level and trendline support.  Supply concerns from Iran sanctions and Venezuela are typically countered with record U.S. output and announcements from Russia, Saudi Arabia and other oil producing nations to counter any lost production.

Oil Oct ’18 Daily Chart

Oil Oct '18 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.