| The crude oil and natural gas are two markets that have underperformed of late in our opinion and remain tethered to the $67.00-$70.00 per barrel threshold in crude while Summer 2025 natural gas can’t escape much above the 3.00-3.20 level. I’m attaching 4 trades for consideration into 2025, 2 conservative and 2 aggressive for Natural Gas and Crude. It is my belief that the reasons to be long crude come on two fronts despite the noise from news reports that the Saudis are going to raise production in December, it may not matter in my view. First, Geopolitical risk factors for oil so far have not been a major bullish input for oil, as there hasn’t been a major supply disruption yet. This could change at any moment. Last week Reuters reported that Iran has been facilitating secret negotiations between Russia and Yemen’s Houthi rebels, aiming to transfer advanced anti-ship missiles to the group, according to three Western and regional sources. The Wall Street Journal reported that Israel said it intercepted the first missile Hezbollah had ever fired at the commercial capital of Tel Aviv, with the militant group saying it was targeting the command headquarters of Israel’s Mossad spy agency. Hezbollah said that Mossad, the target of the missile, is responsible for the assassination of several of its leaders, as well as pager attacks on its members. Bottom line to all this is, Israel is going to take out Hezbollah in a different way than they took out Hamas, and they have said they need to take out the head of the snake to end this whole effort to destroy Israel. It is simply a matter when not if Hezbollah realizes they are being picked apart and further disabled each day by Israel. When it all blows, then Brent Crude goes in our opinion over $90. Even the White House now says there is no chance for any cease fire before next year. Things in Lebanon are just beginning to go over the cliff. Friday’s assassination of Nasrallah – the most powerful leader in Tehran’s Axis of Resistance against Israeli and U.S. interests in the Middle East – was one of the heaviest blows in decades to both Hezbollah and Iran. After two weeks of intensive airstrikes and a string of assassinations of Hezbollah commanders, Israel has suggested ever more strongly that a land invasion is looming. It is my belief that Iran will need to decide to get involved or not, and if not, then they become a paper tiger and lose all respect. Their proxies lose all hope of Iran helping. This could be reinforced if Israel attacks Yemen soon with another major attack. If Iran does get involved, it is my opinion that their oil fields get destroyed and the nuke facilities get destroyed even though they are inside a mountain. So, oil prices will rise in my opinion, and depending on the severity of these escalations significantly higher than $70 per barrel. Second, Interest rate cuts here in the US and massive monetary stimulus in China keeps the printing presses rolling more dollars. Any time your print more of something it becomes worth less in my view. That should keep a lid on the Dollar while the Chinese are doing anything possible to shore up their housing sectors and more importantly their stock market. According to the World Gold Council, The PBOC (Peoples Bank of China) is back in the market buying Gold after a two-month break, while every Central Bank in the World it seems is increasing their reserves. This bodes well we think for tangible assets with food and energy at the forefront. Seasonally it is my opinion we may be getting closer to a bottom here as we get closer to winter and global inventories are still below average in the diesel category. In my view the same time US oil supply is tight and could get tighter when winter approaches. Trade Ideas below in Crude and Nat Gas. Crude Oil Aggressive Options: Sell the Dec Crude 63.00 vs 61.00 Put Spread. Use the credit collected to buy the August 2025 crude 85 vs 95 call spread. Cost to entry at even money minus all commissions and fees. Risk: The max risk is 2K per spread plus trade costs and fees. If December 24 crude can stay above 63.00 per barrel by the time options expire in Mid-November 2024, the short put spread which is the risk on this trade will have expired worthless in your favor as one is long a call spread that doesn’t expire until mid-July 2025. Crude Oil Conservative Options: Buy the September 2025 90.00 vs 100.00 vertical call spread for 40 cents or $400 plus trade costs and fees. Risk: The cost of the spread plus trade costs is the risk. Suggested risk is 30 cents or $300 plus commissions and fees. Natural Gas Aggressive Options: Sell the December 290/280 put spread and use the credit to buy the July 5.00/6.00 call spread for even money minus trade costs and fees. Risk: Risk is 1k plus trade costs and fees. If December Nat Gas can stay above 2.90 by the end of November, the risk on the trade will have expired worthless in your favor as one is long a call spread that doesn’t expire until late July 2025. Natural Gas Conservative Options: Buy the August 2025 5.00/6.00 call spread for 4 points or $400 plus trade costs and fees. Risk: the price paid for the spread plus commissions and fees is the maximum risk. Suggest risk is 3 points from entry plus trade costs and fees. |
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| Sean Lusk, Vice President, Walsh Commercial Hedging Services Sean Lusk is a registered commodity broker and Vice President of the Commercial Hedging Division of Walsh Trading in Chicago. Sean began in the business as a runner on the trading floor during summer breaks from college in 1993. Upon his graduation from Southern Illinois University at Carbondale in 1996, Sean began his career on the trading floor of the Chicago Mercantile Exchange (CME). Overseeing billions of dollars of transactions working as a clerk in the Eurodollar pit, Sean took the next step and became a floor broker and member of the CME in 2003. He handled customer orders for banks and investment houses from all over the world from inside the Libor pit at the CME. Now, at Walsh Trading, Sean utilizes his experience in the marketplace and his professional client service skills to aid and assist customers in their trading endeavors. Sean writes daily and weekly commentaries focusing on the Agricultural Markets along with related market activity. He has been quoted in various media outlets discussing futures markets. These include, Futures Magazine, Reuters, Forbes, Kitco, Nikkei Press and CCTV.com. Additionally, Sean hosts a Weekly Grain Outlook webinar. Contact Sean Phone: 312-957-8103 or 888-391-7894 Email: [email protected] www.walshtrading.com Walsh Trading, Inc. 53 West Jackson Bouldevard, Suite 750 Chicago, IL 60604 |
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