Crude Oil struggled to find direction this week as neither support nor resistance was broken. We failed to se a continuance of the previous weeks dip below 60.00 a barrel and the mixed API data did little to clarify future expectations. Many analysts were surprised
to see a continuation of the declining demand numbers for Unleaded from this time last year. Together with the larger than expected build in Crude Oil inventories (4.4 m/b increase as opposed to 2 m/b expected) this would seem to be enough to sink this market in and of itself. However, winter is coming and Distillate inventories continue to drop at the time we should be stockpiling builds for the winter.
Nat Gas rallied strong ahead of Thursday’s inventory data but found it hard to sustain with larger than expected builds bringing the market back into the 12’s during trading on Friday. The recent Nor-Easter seemed to be indicative of the cold winter many have feared but those fears have been quieted for now as temps across the country have settled into a much milder range as the week progressed.
I am still a Bull for the Heating Oil and Natural Gas markets but I don’t see Crude being able to make a convincing run to the upside with inventories where they are now. We just entered an intermediate term Heating Oil Bull Call Ladder Spread and I continue to hold February Puts in Crude.
Odom & Frey Futures & Options