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USO

Fundamental QuagmireIt appears the underlying fundamentals have hit equilibrium. The supply/demand imbalance continues to get worse as more countries post econ data supporting slowing trade. My favorite number so far this week is from Korea. The 11th largest economy in the world reported a 10% decline in exports from the previous year. Here in the US we are expecting inventories to pick up (possibly posting net gains for the first time in weeks) as production gets back to peak capacity after tropical storm Barry disruptions last week. Despite the increasingly bad news for crude bulls, geo-political tensions continue to escalate in the gulf as Iran seized a UK affiliated tanker and its crew. The UK is said to be looking at sanctions against Iran but I doubt sanctions would be enough to see prices rise. If we get another tank seizure or drone incident that could change. I'm still bearish long term and net bearish in the short term but I think this could be a "choppy" week for Oil as the bull and bears fundamental narratives vie for control of price action. Longs should be wary of bearish API and EIA numbers this week and Shorts will want to stay up to date on developments in the gulf. Agree? Disagree? Let me know what you are thinking!
NYMEX:CL1!
by CheersOrTears
Longs Beware!Prices have gone up since June on geo political tensions between Iran and US, OPEC curbing production, and Just this week worries about tropical storm barry (possibly hurricane barry) making landfall in Louisiana. To some it looks as if we hit the bottom and are going to make a new high for the year. Before you go long, let me offer some contrarian points to give you some alternative context. 1.) Global slowdown of growth and trade: Less capital production and trade mean less oil consumption. Despite OPEC's commitment to curb production it might not be very effective if we continue to see trade dominate headlines in negative ways. 2.) Geo-Politics: Yes its true we've seen some price surges on tensions in the Straight of Hormuz with Iran. However the bigger picture seems to be in the opposite direction. If you look at when Trump reinstated sanctions on Iranian oil exports back in Nov 4, 2018 the price has dropped and stayed below $75. Since Trump scuttled the Iranian nuclear deal, suppressing prices on Iran's top export (Oil) has been a key priority. Trump has been encouraging oil production in the US (now the worlds leading oil producer) to appease voters for re-election and in hopes it will force Iran to renegotiate a deal under his terms. Look for a continuation of this sympathetic ear to drilling, pipeline access, and campaign promises to keep prices lower to "ensure national security via energy independence". If you still prefer goin long, Iranian escalations provide excellent long scalps. As long as Trump doesn't start a war with Iran, don't expect a real reversal on geo-political headlines. 3.)Hurricane whiff: There's no doubt tropical storm Barry (possibly hurricane) will cause damage to Louisiana. However, most of the offshore rigs and port refineries have been built to withstand hurricanes lower than category 3 without much issue. Flooding may delay the refineries from getting back online or regaining full capacity, but they won't cause long lasting infrastructure damage. This might still sound bad but of the 5 million barrels that are exported in the gulf only about 700,000 of them come from Louisiana. (majority is from Texas) In spite of the bad weather the majority of refineries in Louisiana are expected to continue operations at some capacity over the coming days. I will say its only the first hurricane/storm of the season and its kicking off early. With climate change increasing the intensity and frequency of extreme weather, the possibility of a big storm wreaking real havoc on the oil market will hold merit till November. Keep your eyes peeled on these weather updates for long scalp opportunities. Agree? Disagree? Let me know what you are thinking! Wish everybody a safe and happy weekend.
NYMEX:CL1!Short
by CheersOrTears
5
THE WEEK AHEAD: GLD, GDXJ, GDX, SLV, USOEARNINGS No options highly liquid underlyings announcing earnings this week. BROAD MARKET EEM (15/18) QQQ (19/19) IWM (19/18) SPY (19/15) EFA (10/12) One word ... . Well, maybe two: "Weak sauce," with ranks in the low quarter of their 52-week ranges and background implied at sub-20 across the board. SECTOR EXCHANGE-TRADED FUNDS Top 5 By Rank: GLD (92/16), GDXJ (71/33), SLV (64/21), GDX (48/28), USO (47/43) TBT (52/24). Pictured here is a GLD Synthetic Reverse Jade Lizard, explained in the post, below. For those of a more nondirectional bent, the Aug 16th 127/140 short strangle is paying 1.72 with a 70% probability of profit, although I'd recheck that setup at New York open for delta balance ... . GDXJ: August 16th 34 short straddle, 3.45 credit with >expected move break evens, delta/theta -11.03/3.02. GDX: August 16th 25 short straddle, 2.12 credit with >expected move break evens, but a little on the weak side in terms of credit collection. Delta/theta: -10.52/1.84. SLV/USO: August has yet to populate ... . In petro, my go-to is generally XOP (34/35), but the August expiry has yet to populate. Given the size of the underlying, I would probably continue to short straddle it here, assuming that it's still paying greater than 10% of the price of the underlying (i.e., >2.70 or so in credit for the short straddle nearest at-the-money).
AMEX:GLD
by NaughtyPines
USO, not buying the bear marketOver the past month especially, crude has fallen into a bear market. Most of this bearish reasoning is coming from the U.S. EIA reports which is showing a large amount of undocumented crude which has resulted in a very swollen crude storage inventory, mostly all in PADD 3 (Gulf Coast.) There is strong reasoning to believe that this undocumented crude is actually plant condensate, which is not exactly an equivalent of crude oil yet being counted as such by weekly data. If we deduct this probable phony glut of non-crude oil which is more likely some type of condensate, would we still be in a bear market? Possibly, a little bit at least, but that would have much to do with lower refinery run rates and Trump's trade wars. Venezuelan imports to U.S. are down to zero. Canadian imports can only ramp up nominally by railroad. Saudi Arabia exports to U.S. have been extremely low, in the 400,000 barrels per day region and there isn't much alternative to recovering those lost barrels from elsewhere as heavier barrels have become a scarcity. It is very possible that at the end of the month, EIA 914 monthly data corrects U.S. weekly data production numbers with a downward revision. Texas' Permian basin rig count has fallen significantly, while the North American rig count overall is down big time; completions in the Permian have also not taken off, they have grown, which tells us that it seems unlikely the U.S. could have shot up to over 13,000,000 barrels per day in production. It is more likely in my opinion that we see a decline or flatlining in U.S. production as it appears many U.S. producers are focused on (attempting at least) to generate free cash flow to appease everly demanding shareholders. I think the overall market will be taken by surprise when it comes to realize that condensate has been getting counted as crude and that U.S. production isn't going to be growing as many analysts forecasts; all this is happening at the same time, historically reliable suppliers like Venezuela completely fall into an abyss and OPEC appears as disciplined as ever, while Canadian pipelines are delayed which reduces egress potential to the market in the coming couple years.
AMEX:USOLong
by chriskanaan
OIL day trades June 3rdToday looks like a 54 to 56 trading range could be the play so will look to trade back and forth if we remain in this consolidation. A break below will have me hold shorts from above if the signals are bearish, and a break above 56 I will hold the long from below if the signals are bullish. So summary is 54 to 56 I will short the top of this range and long the bottom but as the trade moves towards the opposite range boundary will see if I see enough strength to carry me past this range and if not will take off the profit. alternatively if trading more than 1 lots will reduce size and boundaries and hold a single runner for possible break out
FX:USOIL
by alleytrader