Navigating Crude Oil Volatility Around OPEC MeetingsOPEC is a unique organization whose decisions impact national sovereignty, energy security, and most directly on crude oil prices.
OPEC’s decisions have material influence on crude oil prices. All eyes on OPEC+ ministerial meeting taking place virtually now on June 2 (instead of an in-person meeting on June 1 as planned previously). OPEC is widely expected to roll over its production cuts until year-end to support prices until demand improves.
Supply-Demand balance will tilt in the second half of 2024 if OPEC decides to continue its production cuts as the global economy heads into a season of rising demand.
Source: CME Group OPEC+ Watch Tool as of markets on 27th May 2024
CME Group’s OPEC Watch Tool shows a 79.06% probability of the supply cuts remaining unchanged and an 18.79% likelihood of ease in cuts.
Negotiations within OPEC could be challenging as not all members are satisfied with production cuts.
Iraq's oil minister - Hayyan Abdul Ghani - said his country would not agree to another supply cut, as per Bloomberg . Iraq is OPEC's second-largest oil producer after Saudi Arabia.
Iraq and Kazakhstan's repeated breaches of their supply quotas have caused tension within the group. Promises from both countries to compensate for overproduction have not been kept.
Source: OPEC
OPEC+ has cut output by 5.86m bpd, approximately 5.7% of global demand as per Reuters .
The U.S. followed by China and India are the top three consumers of crude oil. US guzzles 20% with China consuming close to 16% of the world’s oil production.
China’s feeble demand has been a significant headwind and remains so despite its stimulus package.
CHINA'S TEPID DEMAND CONTINUES TO WEIGH ON OIL
China is the largest importer of crude oil and its second biggest consumer. Chinese demand for crude remains tepid.
Its economy is showing signs of recovery but remains uneven. Industrial output surpassed analyst expectations , growing by 6.7% YoY in April. Retail sales rose by 2.3% YoY well below analyst forecasts. Sluggish consumer demand impacts oil consumption. April oil imports fell 8.8% MoM to 44.7m tonnes.
In April, China's Manufacturing PMI rose to 51.4 from 51.1 in March, surpassing analyst expectations of 51.0. Services PMI slightly fell in April to 52.5 but remains in expansionary territory of >50.
Source: TradingView
Consumer Confidence Index rose to 89.1 but remains near record bottom levels. It is well below its average of 109.8 as Chinese consumers remain pessimistic due to persisting property crisis.
Source: TradingView
US SPR BEGINS REFILLING BUT WILL NOT MATERIALLY IMPACT OIL PRICES
The US government remains vigilant about gasoline prices in an election year. President Biden's energy advisor, Amos Hochstein, stated that the Strategic Petroleum Reserve (SPR) has enough stockpiles to address any supply concerns.
The Biden administration has been replenishing the SPR after having depleted it by 180 million barrels in 2022. US government bought back 32.3 million barrels at an average price of USD 76.98/barrel throughout 2023 and early 2024.
Having cancelled purchase of three million barrels due to elevated prices, it resumed refilling by looking to buy 3.3 million barrels earlier this month.
NAVIGATING OPEC DECISION IN JUNE
CME Group’s OPEC Watch Tool shows likelihood of different outcomes using WTI Crude Oil option prices. It assigns likelihood to each outcome based on nearest weekly & monthly options.
Probabilities for the June meeting is derived from the Jul 2024 monthly contract (LON4) and the closest active weekly option prices.
Source: CME Group
The market’s assessment of OPEC’s decision changes dynamically. Navigating a constantly shifting volatile landscape requires liquid instruments that are curated for duration risk. The CME WTI Weekly Options do precisely that.
It enables superior risk management to deftly manage short-term price fluctuations with reduced premiums due to short time-to-expiry. Traders can hedge against near-term price volatility stemming from OPEC meetings, EIA reports, geopolitical events, and weather shocks.
CME Group offers Monday, Wednesday, and Friday weekly options, each with four options available at the beginning of the month, in addition to monthly options. As each weekly option expires, new listings are introduced for the following week. These are settled into WTI Crude Oil futures.
HYPOTHETICAL TRADE SETUP
In the lead up to OPEC+ meeting, implied volatility of WTI prices is low but expected to expand closer to date.
Source: CME Group
Crude oil price action will remain muted if OPEC+ decides to extend its current voluntary cuts of 2.2 million bpd. Weekly options can help harvest near-term volatility to benefit from muted price moves using iron butterflies.
The iron butterfly is a limited reward and limited risk options strategy designed to reap gains during times of low-price volatility.
It involves four legs to the trade, namely, (1) One short ATM call option, (2) One short ATM put option, (3) One long out-of-the-money call option, and (4) One long out-of-the-money put option.
Optimal condition for executing iron butterfly is when implied volatility is high while underlying commodity price action is expected to be mild.
Based on 27/May market prices, the hypothetical trade set up using weekly crude oil options expiring on 3rd June 2024 involves (a) Selling 78 ATM Call, (b) Selling 78 Put, (c) Buying 80 Call, and (d) Buying 76 Put.
Source: CME QuikStrike
At expiry, if WTI June crude oil prices settles between USD 76.6 and USD 79.4, this trade would generate a gain of USD 1.4/barrel or USD 1,400/lot using CME WTI Crude Oil options as each lot represents one thousand barrels.
If crude oil prices rally above USD 79.4/barrel, this trade can rake up maximum loss of up to USD 0.87/barrel or USD 870/lot. If oil prices collapse below USD 76.6, then this trade will result in maximum loss of USD 0.87/barrel or USD 870/lot.
Ignoring transaction costs, the iron butterfly exhibits a reward-to-risk ratio of 1.61x with a maximum upside of USD 1,400/lot and maximum loss of USD 870/lot.
MARKET DATA
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DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
QM1! trade ideas
Crude Oil Weekly Analysis- 20th to 24th May 2024
Over view
As per my previous weekly analysis, Crude oil had great ride from beginning of this year and paused from previous month. Fortunately this was necessary for having further movement. We can consider the previous month process was retracement thus by expecting further movement in upcoming weeks.
Any small bounce from this level would be great bullish indications for good week ahead.
Weekly TF
Price has exactly reacted at 0.382 Fibonacci level which is good sign of bullish continuation.
Good green candle formation after doji formation & crossed 50 EMA
Day TF
Trend: Upward range with 3 consecutive support(HL 01, HL 02, HL 03).
Now HL04 has been created and rejected at same level by creating double bottom.
Inside candle breakout has been found after creating Doji & Bullish hammer.
Price has been rejected from crucial key level
0.5 Level rejected in Fibonacci
Buy:
Entry 01:6691
Entry 02: 6962
Final Target expected: 7235
Direct Gapup/Gapdown entry should be avoided
Get confirmation from any of the leading indicators before entering trade
Kindy comment below in case of any clarification required on this particular idea.
Please follow for more ideas
MCX:CRUDEOIL1!
CRUDE OIL (CLN2024, USOIL, WTI)... BEARISH!Bias is Bullish.
Daily TF shows 2 weeks of
consolidation supported by a Daily
+FVG. Friday finally saw a "BO" as price
traded through the swing high with
a close above it. Note that price is
now inside the a Daily -FVG.
Potential for a bearish reaction? Yes.
However, I believe it will be short term
if anything.
The 4H gives more detail.
One can see bullish structure in
place that will support a move higher,
potentially to to test 80.21.
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May profits be upon you.
Friday retracement?? Forecasting.I am looking at crude to make a retracement today after couple days of down movement its been nice but can;t last forever.
So the arrows display where I think price will go today as a first target and second PDL
Keep it real simple on Fridays you got the weekend coming and you don't want to go into it with a loss or a win stay neutral.
A Bottom In Crude Oil?Crude Oil (July)
Yesterday’s close: Settled 77.57, down 1.09
WTI Crude Oil futures are showing renewed life this morning, trading nearly 2% from the low through Asia’s open. In fact, commodities broadly were hit sharply during that timeframe. Soft economic data and hawkish Fed speak have been a headwind this week, but less of a draw than expected on yesterday’s weekly EIA inventory report and news that Russia overproduced in April brought additional market pressures.
Have we hit peak pessimism? WTI Crude Oil futures tested and responded to a significant area of support overnight, potentially building out the right shoulder of an inverse head and shoulders going back to May 8th. As today’s session unfolds into the final day of the week, we believe continued price action above our Pivot and point of balance at 78.08, the .382 retracement back to the 80.11 high, will help invite fresh buying.
Bias: Neutral/Bullish
Resistance: 78.33-78.47***, 78.86-79.04***, 79.34**, 80.09-80.11***, 81.28***
Pivot: 78.08
Support: 77.35-77.60***, 76.63-76.82**, 75.70-76.46****, 74.66-74.70**
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Elliott Wave Analysis on Oil (CL) Looks for Short Term WeaknessShort Term Elliott Wave in Light Crude Oil (CL) suggests the decline from 4.12.2024 high is in progress as a 5 waves impulse. Down from 4.12.2024 high, wave 1 ended at 81.56 and wave 2 rally ended at 86.28. Wave 3 lower ended at 76.89. The 1 hour chart below shows the starting point from wave 3. Wave 4 bounce unfolded as an expanded Flat structure. Up from wave 3, wave ((a)) ended at 79.96 and wave ((b)) ended at 76.70. Wave ((c)) higher ended at 80.6 which completed wave 4 in higher degree.
Oil has turned lower in wave 5. Down from wave 4, wave (i) ended at 79.17 and wave (ii) ended at 79.85. Down from there, wave i ended at 78.08 and wave ii ended at 79.5. Expect wave iii to end soon, then it should see 2 more lows to end wave (v) of ((i)). Afterwards, it should rally in wave ((ii)) to correct cycle from 5.20.2024 high in 3, 7, or 11 swing before it resumes lower again. Near term, as far as pivot at 80.6 high stays intact, expect rally to fail in 3, 7, or 11 swing for further downside.
Can Crude Oil Futures Breakout?Technical Momentum Weakens
Crude Oil futures are declining in 2024 after correcting to the 200-day moving average at $77.55. The technical perspective shows momentum studies recovering from oversold territories, while the 9-day moving average is trading below the 18-day. DMI- is above DMI +, indicating that the market is in a correction phase, while the Average True Range declines to $1.46 daily.
API Inventories Rise
API Inventory has increased recently, indicating a more relaxed supply picture. Recent API inventory data shows a build of 2.5 million barrels. The current EIA inventories are 457 million barrels, compared to the five-year average of 475 million barrels for this period.
Cushing stocks in the Midwest show 35 million barrels in inventory versus a five-year average of 43 million barrels.
An Expanding Economic Tailwind
The U.S. economy continues to expand in 2024, driven by the high probability of a soft landing, which fuels investor sentiment. Geopolitical tensions have eased recently; however, there is the possibility of a widening Middle Eastern conflict in the future. Traders will remain focused on inflation data, inventory productions, and the direction of economic data.
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CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Crude Wednesday Pre NewsSo this is the forecast for Crude pre 1030est news.
I'm favouring some BSL to be taken if the 1hr FVG gets disrespected.
With 1hr fvg above and the BSL that is pointed out with the arrows.
If we show rejection from the 1hfvg we are currently near then PDL will be the target.
With news there is no certainty.
Overall I am HTF bearish however a sweep on BSL could be on the cards today.
Crude OilThis is not a trading signal, it is my own opinion, if you copy the trade is on your own risk.
Oil has broken the down trend channel , so far there is still move to the down side to retest the previous support, which will probably create triple bottom to indicate for break through to the up trend if it breaks the sideways channel.
Long position opportunities Price has been in a range for couple weeks, just retraced to 61.8 bullish retracement headed to the top of the range. This is a low risk trade with make buying major coming in to the top of the range, I’ll take two positions and close one at the top of range and wait to see if price breaks above the range finally send position tp will be at 61.8 of bearish retracement of the last impulse. Will update trend line. The range is below 38.2 which is the resistance. If price fails with daily close may consider another short.
On another note Iran’s president passed and the reaction to price was minimal.
$80 Headwinds, Any Hope for Crude Oil?Crude Oil (July)
Yesterday’s close: Settled 79.30, down 0.28
WTI Crude Oil futures started the week unenthusiastically with a failure at the psychological $80 mark that aligns with a key .382 retracement and fell short of pinging the 50-day moving average. OPEC+ instability was downplayed after the death of the Iranian President on Sunday, while prices have been in a downtrend since peaking on geopolitical tensions through mid-April, and seasonality concerns persist after the Memorial Day holiday. While we still see value against our critical area of support highlighted below, a continued test erodes confidence.
Bias: Neutral/Bullish
Resistance: 78.59-78.76**, 78.99*, 79.35-79.67**, 80.09-80.11***, 81.28***
Pivot: 78.25
Support: 77.65-77.86***, 77.26**, 75.70-76.36****
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Crude Oil Tuesday ForecastI Have in Mind that we will be BEARISH bias mostly this week as we have Tapped into the Premium Daily FVG yesterday and rejected lower.
My two targets shown in the forecast are the arrows.
Daily PDL
Weekly SSL
Now it is important to realise that the market is moving in London and a straight sell into 0830 or 0930est wouldn't be the best move.
Waiting for a retracement and then finding your model to get into the market is what we all strive for and to do couple times a week as intra day traders if the market gives us the opportunity.
Lets see how this plays out !!!
[Commodity] Crude Oil Buy IdeaNote -
One of the best forms of Price Action is to not try to predict at all. Instead of that, ACT on the price. So, this chart tells at "where" to act in "what direction. Unless it triggers, like, let's say the candle doesn't break the level which says "Buy if it breaks", You should not buy at all.
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I use shorthands for my trades.
"Positional" - means You can carry these positions and I do not see sharp volatility ahead. (I tally upcoming events and many small kinds of stuff to my own tiny capacity.)
"Intraday" -means You must close this position at any cost by the end of the day.
"Theta" , "Bounce" , "3BB" or "Entropy" - My own systems.
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I won't personally follow any rules. If I "think" (It is never gut feel. It is always some reason.) the trade is wrong, I may take reverse trade. I may carry forward an intraday position. What is meant here - You shouldn't follow me because I may miss updating. You should follow the system I share.
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Like -
Always follow a stop loss.
In the case of Intraday trades, it is mostly the "Day's High".
In the case of Positional trades, it is mostly the previous swings.
I do not use Stop Loss most of the time. But I manage my risk with options as I do most of the trades using derivatives