Crude Oil

Last week the shorts were all lined up for another bearish inventory report for Petroleum products from the EIA, but lo and behold, miracles do actually occur.

The Structure of Crude Oil,including Contango and Options Skew, provides options and futures traders unique opportunities to limit risk and initiate positions with excellent value.

Crude closes above $80 yesterday for the first time since May. However, a look at some fundamental and macroeconomic signals showed crude oil could be under increasing pressure, thus range-bound, through the rest of this year.

[1] The S&P 500 meets key trendline resistance on day 55 of a Fibonacci time cycle as exponential moving averages cluster ... [2] daily, weekly and monthly support / resistance levels for the US Dollar ... [3] Crude Oil futures trace out a tricky wedge formation

Nice stuff ...

Copper and crude oil are both base essentials heavily reliant upon by economies globally for everyday usage, with no meaningful substitution options. Gold, on the other hand, is not as essential to keep the everyday world running seamlessly, and could conceivably be substituted by other commodities with a change in global monetary standard or people’s perception. From that perspective, I think there are a few recent trends pertaining to crude and copper that are being misinterpreted.

After reading a Zero Hedge article on crude oil futures earlier today I was motivated to write something on the topic. I have been railing against the securitization of the oil futures market for some time. It’s nice to see someone else sharing those sentiments. Below are some notes I jotted down after reading the article.

I do have to agree that for 14-15 months, almost without interruption now, and since August, 2007, more generally, that the Nymex crude oil contract has too often been used as a surrogate for the economy, the DJIA or currencies, most notably the euro. However, last week’s sharp decline may have severed the relationships, at least temporarily. - Peter Beutel, Cameron Hanover

Bloomberg reported that crude oil open interest was 1.41 million contracts, the highest since June 11, 2008. Some analysts think the high level of open interest raises concerns about whether the market is overvalued relative to fundamentals and whether the upward price trend can continue.

Crude futures ended at their lowest point this month Friday, as investors fled riskier assets after regulators charged Goldman Sachs with fraud. Nonetheless, industry insiders are fully expecting this still intact seasonal pattern: a rise in gas prices in the months ahead during the summer driving season (from April 1 to Sept. 30).

Desire to become global superpower driven by underlying principle that the world lacks enough supply of natural resources to prolong the existence of every sovereign nation over the long run.

New York crude has been trading in the $69-$83 range since late September as uncertainty over the global economy has contributed to several failed rallies. The close above $81 last Friday sparked speculation that oil could be targeting $85 in the near term. Now, some traders and analysts say currency movements may play an important role in pushing prices beyond those limits.... or will they?

In this 1.27.10 edition of the Fibozachi Technical Update (FTU), we present 15 technical profiles of the:

(1) S&P 500 E-mini contract (ES); (2) VIX (CBOE Volatility Index); (3) NYSE VOLD; (4) NYSE TICK; (5) US Dollar Index (DXY); (6) Crude Oil Futures (CL); (7) Gold Futures (GC); (8) Silver Futures (SI).

Examining today's sell-off in Gold, Silver and Crude Oil and the concurrent rally of the US Dollar Index across daily and 1-minute charts

Last Friday, U.S. crude oil futures finished above $78, the highest level in a year, even though the U.S. continues to sit on ample supply of petroleum. Some analysts said a sudden upward spike was still unlikely, while others are predicting an immanent correction down below $70. However, if you take a closer look, it is evident that the current crude oil market is almost entirely detached from fundamentals. Furthermore, there are several factors supporting oil rising to new levels, as fundamentals are out the window in the near to medium term.

Crude supplies continue to accumulate as the demand picture continues to deteriorate.