Haven’t I been saying for days to short crude oil at $99 and $100? Didn’t I clearly say crude would rebound once around $95.94?
Crude oil was really strong last night. It began its first rebound after dropping to $95.32. Lately, following San Pao’s crude oil calls, I’ve already taken a short position.
Here are the signals telling us:
First, crude oil has support around $95. For now, neither oil-exporting nor oil-importing countries can reach an effective agreement over the strait. Tankers either risk going through the Strait of Hormuz or take a detour at several times the cost. Prices won’t fall too sharply, but they won’t rise very far either. In fact, as time goes on, the premium pushing crude prices higher should come down.
Second, the U.S. API crude oil inventory figures were released today. The draw was larger than the expected 1.107 million barrels, coming in at 4.931 million barrels. This again highlights that domestic oil production is insufficient, and that the shortage of oil is keeping prices from falling below $95.
But the EIA crude oil inventory report is still due tonight, with the same expected draw of 1.107 million barrels. If it shows an equally low inventory level and a large draw, crude oil will make another run higher tonight, before cooling off and seeing its premium decline.
Today’s strategy is very simple. Since we trade CL (U.S. crude oil), this is a multiple-choice question:
1. U.S. EIA weekly crude oil inventories come in above -500,000 barrels
Go short directly. No matter what crude oil is trading at at 10:30 tonight, short it and target $95–$93. Adequate inventories help reduce inflation in U.S. crude oil prices.
2. Crude oil inventories come in below -1.5 million barrels
Stay long. Target $103–$105. A continued decline in inventories will drive energy inflation higher. Tight crude oil inventories and high import costs will push prices up.
The fundamentals for crude oil are simple: whether exporting countries have plenty of oil, how high the cost of tanker transport is, and whether importing countries have sufficient oil inventories. These three factors affect oil prices.
Crude oil was really strong last night. It began its first rebound after dropping to $95.32. Lately, following San Pao’s crude oil calls, I’ve already taken a short position.
Here are the signals telling us:
First, crude oil has support around $95. For now, neither oil-exporting nor oil-importing countries can reach an effective agreement over the strait. Tankers either risk going through the Strait of Hormuz or take a detour at several times the cost. Prices won’t fall too sharply, but they won’t rise very far either. In fact, as time goes on, the premium pushing crude prices higher should come down.
Second, the U.S. API crude oil inventory figures were released today. The draw was larger than the expected 1.107 million barrels, coming in at 4.931 million barrels. This again highlights that domestic oil production is insufficient, and that the shortage of oil is keeping prices from falling below $95.
But the EIA crude oil inventory report is still due tonight, with the same expected draw of 1.107 million barrels. If it shows an equally low inventory level and a large draw, crude oil will make another run higher tonight, before cooling off and seeing its premium decline.
Today’s strategy is very simple. Since we trade CL (U.S. crude oil), this is a multiple-choice question:
1. U.S. EIA weekly crude oil inventories come in above -500,000 barrels
Go short directly. No matter what crude oil is trading at at 10:30 tonight, short it and target $95–$93. Adequate inventories help reduce inflation in U.S. crude oil prices.
2. Crude oil inventories come in below -1.5 million barrels
Stay long. Target $103–$105. A continued decline in inventories will drive energy inflation higher. Tight crude oil inventories and high import costs will push prices up.
The fundamentals for crude oil are simple: whether exporting countries have plenty of oil, how high the cost of tanker transport is, and whether importing countries have sufficient oil inventories. These three factors affect oil prices.