Rebalancing And Profit Taking In The Oil Market

The month end is bringing some rebalancing and profit taking in the market and crude oil prices look like it’s behaving in the same way as well on fairly low volume this London lunchtime. Given it’s almost the time of the month when the extremely transparent indices start rolling their futures, i thought the investigation of the USO roll by CFTC is worth mentioning.

Whether anything comes out of this investigation is still to be seen but SFOT suspects it will take an uber long time before any half decent outcome. Stocks in storage in cushing is still very high, and this gives rise to the same opportunity of selling the front time spreads prior to the roll and then buying it back around the actual roll period.

SFOT is beginning to get comfortable with looking at equities, gold, jpy being highly correlated intraday but is unable to keep up with the news flow coming out from the US in the later session hence he is keeping positions in other asset classes light. While oil prices have been relatively stable, particularly in Brent crude where the monthly roll effect is nowhere as large as WTI, SFOT sees no reason for any breakout of the range 35-60 and is happy with the strangle in M9, particularly in Brent.

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