Plentiful Supply
Crude oil took another move down on Tuesday. Crude closed on a seven month low, in anticipation of a limited draw down in supply. The August crude futures contract was down over 2% , flirting with the $43.00 per barrel level. OPEC’s agreed upon production caps don’t seem to have the market players concerned about supply at this point.
New Players
Libya and Nigeria do not participate in the OPEC agreement, and continue to produce with no cap in mind. Libya is producing a four year high of almost 900,000 barrels a day. Nigeria is forecast for 164,000 barrels per day for July . That number is projected to go as high as 225,000 in August, which will continue to add to the overall world supply.
Energy Numbers
Tuesday afternoon will bring the API report, followed by the EIA report on Wednesday morning. Right now the market is telling us that it doesn’t think there is anything bullish to see in those reports. Since much of the assumed bearish numbers seemed to be priced in, I wouldn’t look for another big move down on Wednesday. We might see it continue to slowly move lower over the next few sessions, interrupted on occasion by short lived rallies.
Finding a range
Right now it seems to me like the market is putting in a range to trade going into peak summer. Longer term, I am looking for a range of about $48.00 down to $41.50 on the reaches. In the shorter term the market will trade the headlines along with the geo poltical tensions. I have been a fan of using short term options of the weekly variety to trade these moves as of late. They can be used along with a futures position to trade the technical levels. The current trend could see crude trade all the way to $42.10 before running into support.
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