Crude oil – The Ship is Leaning one way…let’s go the other way

Crude oil stocks
Crude oil stocks

After trading near $109/barrel in late August WTI Crude oil futures have trended lower trading near $94/barrel as of this post. The lower jagged line where futures are currently trading represents the 61.8% Fibonacci level and in my eyes a value zone as I expect prices to find support near current trade. As of this post futures are trading at 4 month lows. Until we get a spike in volume or settlement above the 8 day MA (orange line) this is just a hunch as I wait for confirmation. The ship is certainly leaning one way and bearish trade in energies is fast becoming a crowded trade. Supplies continue to grow and demand has been lacking but that is factored into trade and the reason why prices are lower by 14% in the last 8 weeks.

Us stockpiles have climbed roughly 8% in the last 6 weeks as refiners domestically have curbed their processing amid seasonal maintenance work and waning gasoline demand. The EIA last week reported Crude inventories jumping 4.1 M barrels in the week ending 10/25. Crude inventories stand at 383.9 M barrels.

Daily WTI Crude Oil:

WTI crude oil futures
West Texas Intermediate crude oil

Looking back to mid 12′ futures have been in a $15-20 trading range. In recent weeks we’ve started to approach the bottom end of that range. The green line on the weekly chart represents the 50 day MA and currently comes in $3.25 above current trade. I believe we are within a few $ of finding an interim low and will see futures make their way back above $100/barrel in the coming weeks.

Weekly WTI Crude Oil:

WTI crude oil
West Texas Intermediate crude oil futures

Crude Oil Futures Trade ideas:

  • Long January futures with options protection either buying December puts or selling January calls. A December $94 put costs $1150. 12 days until expiration and 50 cents out of the money. Selling a January $96 call would net $1950. 43 days until expiration with a current delta of 44%.
  • Long December 13′ and short December 14′. Current spread is $4 premium to 13′. My target is $8-9. $1000 profit/loss per $1 move in spread.
  • Long January WTI and short January Brent at -11.50 to -12.00. Current trade at -10.75. My target is -8.00 to -7.00. $1000 profit/loss per $1 move in spread.

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As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: or 312-870-1653

[typography font=”Cantarell” size=”11″ size_format=”px”]Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.[/typography]