Nowhere to run to, baby, nowhere to hide. Got nowhere to run to, baby, nowhere to hide. It's not love that oil is running from but it may be commitment. Oil just cannot commit to whether it is bullish or bearish.
Range trading continues much to the delight of day traders as long term position bulls and bears start to show their frustrations. It seems for every bearish story that comes across the wire you get a bullish story to offset it. If you have a profit you had better take it as oil stays home on the range. Oh sure you can prognosticate which way you break out of the range eventually but that will not matter until it does. For the month of November, the extreme high end of the range has been 81 and the low end around 77.
Overnight the same story is being told. Well, we actually have two stories, a bearish story and a bullish one as well. The American Petroleum Institute showed some bearish numbers reporting increases in supply across the board. The API said that crude oil supply increased by 1.22 million barrels last week. As for gasoline the API reported that supplies increased by 1.4 million barrels. We even padded our bloated distillate supply by increasing them by 640,000 barrels.
But before we get too bearish, overnight industrial production numbers out of China could get the bulls jets revved up. The Chinese Industrial production output number surged 16.1%. Hey, I thought the Chinese government was trying to slow things down! Well obviously at this point, not as much as the market thinks.
China was one of the reasons the Energy Information Agency raised their oil demand outlook by 150,000 barrels a day. The EIA said sustained economic growth in China and other Asian countries is contributing to the beginning of a rebound in world oil consumption, leading EIA to revise its expectations for world oil consumption upwards for the second consecutive month. Of course 150,000 barrels a day in a globe with millions of barrels of spare production capacity probably isn't bullish enough to break us out of this range.
So if supply and demand can't give us enough incentive to break out of this range perhaps the weakened dollar will. The dollar hit a 15 month low as Fed officials such as Janet Yellen President of the San Francisco Fed seemed to suggest that the Fed was in no hurry to raise rates anytime soon. Ms Yellen said, things are much better now than they were a year ago, with the glaring exception of unemployment. Rising output, but done with fewer workers means that productivity is rising, but that is sort of a double-edged sword given the level of slack in the economy. Yellen later said, To me, the explanation for this turnaround is clear: Massive and concerted responses by governments and central banks around the world rescued the financial system, brought down interest rates, provided emergency support and broke the economy's downward spiral. Yellen said that, These policies are likely to stay in place for a while to come, and will only gradually be lifted, particularly the low fed funds rate. These comments sank the dollar but the dollar rebounded on report on the British Pound.
Bloomberg News reported that, the pound fell from a three-month high against the dollar after Fitch Ratings said the U.K.'s sovereign credit rating is most at risk among top-rated nations. That gave the dollar a boost and helped break oil from the higher end of this big trading range.
I guess the moral of the story is to take what the market is giving you. If you are a long term bull or bear do not be so blindsided as to not take profits when the market gives them to you. You can keep a core longer term bullish or bearish position but respect what the range may be saying. It is possible that we could be locked up in this range for awhile so do not try to be a hero. If you are unsure of the best way to handle it just call me at 800-935-6487 or email me at email@example.com. Did you know that you could use gold to satisfy part of your margin requirement as opposed to those shrinking US dollars? What's that you say? You do not own any gold? We can help you with that also! Just hit this link at http://www.pfgpreciousmetals.com/index.aspx?ID=638597e5-633d-449a-9787-f7aea282458c. And did you know that if you tune in to Fox Business News you can see me every day? Well now you do!
We're long December crude from apprx 7727 - raise stop to 7745!
Buy December RBOB at 19100 - stop 18900.
Sell December heating oil at 20750 stop 20850.
Sell NGZ at 480 - stop 502.
Senior Market Analyst