Monday, August 22, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Volume
7; Issue 2576
Anywhere But Here
We’ve come so far and accomplished so little.
Is there any doubt after we crossed the $48 level in WTI that we are going to see $50? Nope. It’s inevitable
because if anything, the market remains dedicated to it’s curiosity. We have to see what happens up there, especially if it comes close to the end of the month. Let’s just see who’s all hedged up for the end of August. We
can check out any digital options plays that get triggered with August ending above $50. We’re only human and
we need to know like we read the headlines of the National Enquirer at the grocery store checkout. It’s our NASCAR mentality. We don’t go to see who’s going to win, we go to see who’s going to crash. We are the nihilists
of the oil market. If you don’t believe me, go check out the latest headlines that are out there. There’s nothing
that’s positive about the market. There’s no hip hip hurrah for the move we made in the past two weeks after
hitting the bottom of $40 and getting to $48. Everyone is blaming the OPEC hope and everyone is ignoring the
USD move. We love fear mongering.
The problem that we’re facing ahead is we don’t know what to be afraid of anymore. We want to be afraid that
oil can’t survive above $50, but when we talk about US oil production adjusting higher to fall in line with the rising
rig count, we dismiss that as an EIA accounting fluke. There’s the OPEC meeting that people have a hard time
discerning between a “production cut” and a “production freeze”. We’d like to think that OPEC is fueling the
Bulls, but by now we know that oil Bulls are and should be ignorant to what OPEC says. I’m pretty sure that anyone who actually believes that the oil prices are rising because of OPEC hopes are still thinking Bruce Jenner is
coming back. If anything the 56K shorts covering in WTI by hedge funds last week doesn’t show that they believe in all the OPEC talk, it shows that they can’t afford to keep losing. Especially with fund redemptions coming to an epic peak at the end of the month and the end of Q3.
There’s only one thing that matters going forward and it’s not about OPEC. It’s not about the oil that the US is
finding ways to produce with WTI between $40 and $50. It’s about demand. We’re going to play this out over
the next quarter to the end of the year watching and estimating where the world is going. See for all the records
that OPEC and the Saudis are making with oil production, there’s not a lot more crude out there. The US has
spare capacity. We might be able to lean on Canada and possibly Mexico is a few years away. Beyond that
though, there’s nothing out there that’s promising. Don’t even try to tell me there’s more oil in the North Sea. I
have a better time trying to convince the teeming million that there’s aliens and UFOs at Area 51. I mean there
is, but convincing people is a whole other story. No, we’re not in a world that is awash in an oil glut. We’re in a
world that is trying to get back to where it was economically. A rise in China. A bounce back in Brazil. Japan’s
Olympics. There’s room out there to make the world a better place and a bigger consumer. Get that going and
we get oil above $50 and never looking back.
That’s Hot
That’s Not
 $50 (follow the USD and you can
follow the price of oil)
 USD (it’s the economy stupid...or is
it the stupid economy)
 Refinery outages (eh, what’s a little
flooding in Baton Rouge...a big problem)
 OPEC (hear me now and believe me
later)
 Metallica (just saying every time they
release an album, oil price pivots)
 Tragically Hip (soon to be tragically
lost)
We’re here for the show
Monday, August 22, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Crude:
And another month bites the dust. It’s hard to believe that we’re already moving along
to the CLV6 contract. We now pivot into the last quarter of the year and that should be
worth something to everyone trying to play the cash and financial markets. We kick off
with resistance here at 4890, 4955 and 5038. We’ll look back lower to support at
4766, 4675 and 4552. We’ll also change the lead spread and the front spread moves
up to CLV6/CLX6 and start with resistance at –66, -32 and –10. Support comes back
to –80, -112 and –135. Let’s welcome the new week and the new contract with open
arms. Starting out weaker, finishing with a rally to close.
Gasoline:
OK laziness has been set aside and I’m moving ahead with the RBU16 contract. We
can start with resistance here at 14960, 15155 and 15365. Support looks below to
14775, 14560 and 14366. The front spread moves to RBU6/RBV6. Resistance at
755, 810 and 880. Support to 676, 612 and 575. The RBV6/CLV6 gets resistance at
1125, 1180. Support falls to 1054, 988.
Distillate:
The calendar keeps us moving and we are focused on the HOU16 contract. We’ll get
resistance here at 15065, 15268 and 15445. Support looks back to 14870, 14645 and
14472. The front spread bumps up to HOU6/HOV6. Resistance here looks at –165, 142. Support holds down to –190, -205. The crack moves up to HOV6/CLV6. Resistance at 1568, 1612. Support back to 1526, 1485.
Volume
7; Issue 2576
Techies, some Trekkies
 200 Day MA 4444
 100 Day MA 4681
 13 Day MA 4551
 8 Day MA 4708
 14 Day RSI 60.14
Spread now; Roll later
 Q4 at the door
 Key support: -84, -115, 140
 Key Rests: -52, -20, +10
Trends are only for the affected:
I’ve given up on any real trends that last more than a few days. Sure this last one looks like it’s pushed
us back lower, but just as I look to adjust it here is about when it’s likely to turn around. The bottom line
is that the more we back out into a longer time frame, the more it looks like rangebound trade. We are
flirting with the bottom of the range in the 4000 area on the Daily chart. On the 60min chart we look like
we continue the trend lower, but getting to this 4060 area it’s about time to turn the car around.
Fundy you should mention:
Oh dear Summer, I knew you well. I’m not sure I’m quite ready to let go of the warm weather, but I am
definitely ready to move on past this lackluster trade in the oil markets. The only issue now is that big
money has lost enough patience and cash. We’re going to see some heft redemptions at the end of the
month and especially at the end of Q3. That’s not going to play out well in the next move in oil. Up or
down, the markets are going to be thinned out and it’s going to move fast. We can just let that sink in for
a bit today because there’s not a lot else to ponder on the economic calendar.
Sorry, I am just physically attracted:
Oh now everybody wants some of this. Before I get into the real trouble, there were some issues at Marathon Galveston Bay (459K). The Amityville Horror of the refinery world hasn’t had too many issues
since Marathon took over, but this problem is enough to slow it’s roll. This adds to last week’s list and we
might be at that point in time that after running these US refineries so high for so long that they are all
tipping into faults. Now getting back to something I’ve been on for some time, it’s Venezuela once again.
This time we’re hearing that they are having their own refinery issues. Of course they can’t afford to buy
the crude on credit, but now they can’t even guarantee refined products for cash either. Uh oh.
Monday, August 22, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Volume
7; Issue 2576
Carpe Diem (trade for today):
Let’s not waste time, it’s back to school.
It couldn’t be a coincidence. I go LONG CLV6 above 4870. Strange that we switch contract months right
when we send kids back to school in Texas. I suppose it’s time to get serious about this market again. If
that’s the case and we find ourselves covering back higher, it’s right about here that I think we get some commitment and we focus on what lies above. I’ll take the hint and ride along to the 4930 area.
Standard deviation always wins. I go SHORT CLV6 under 4750. It’s a way away when you consider the market is already looking pretty weak to start. I think that we have to poke 5000 before we have room to retreat,
so I’m going to be cautious as we lean into the short side this early. I’ll look for a trip past this trigger and see
if we have enough run to snap back out in the 4700 area.
For now, the disclaimer can be found here: http://www.oiloutlooks.com/page7.html
Please feel free to share the joy with your friends, colleagues and the bathroom stalls. Have them sign up for the two
week trial and get a personalized thank you note directly from me. Where you going to get a deal like that without a flashing blue light?
We’re on the Web (that’s what Al Gore calls it) at:
www.oiloutlooks.com