Introduction The upward move in WTI Crude Oil since mid-2017 has been relentless, pummeling short-sellers along the way. Since WTI is up close to $ 7 / bbl since mid-December. A Bull In A China Shop The phrase “bull in a china shop” refers to someone who is aggressive and clumsy in a situation that requires delicacy and care. In this case, the term is intended to describe the application of the Chinese language and the pending launch of a yuan-denominated oil futures contract. While I do not believe that the launch of the yuan-based oil futures will spark calamity in the dollar, it does not appear that we are embarking on a new road. And the yuan-based futures contract is an important signpost along that road. Alasdair Macleod recently wrote an excellent article related to the title: Will the Dollar Survive the Rise of the Yuan and the End of the Petrodollar? This is a big deal, especially if the dollar slide continues. This would lead to inflation in all dollar-based commodities like gold, oil and agriculture.
While the trend for crude oil is undoubtedly upward, even more often than not. The time to take a breath could be this week, with option expiration on January 17 th , and the future contract expiration to follow on January 22 nd . Crude Oil Charts WTI crude oil continues to push higher, and is now at its highest levels since 2014. It is a coincidence that crude oil achieves a 3-year high rate of US dollar falls to a 3-year low. After stalling at the 200 week moving average for a few weeks, WTI powered up and powered by its 2015 year highs this week. However, crude oil is over-bought on the weekly RSI. On the daily chart, we can see that a lot of crude oil is on the market. Crude oil prices reached and overtook the Fibonacci extension that I had highlighted for my subscribers as a potential target. WTI would need to fall below $ 60 to be out of its daily uptrend channel. This is bullish long-term in my view, but perhaps is cautionary short-term. WTI Relative Value The front-month Brent-WTI spread has fallen in recent weeks, which makes the upward arbitrage pressure on the WTI price. The current spread near $ 5.50 is favorable for WTI and above recent averages.
The front-month Feb 2018 contract settled Friday at new highs versus the Dec 2018 contract. Forward curve backwardation is generally viewed as favorable for prices. Crude Oil OPEX Magnet Here is the crude oil OPEX magnet since mid-June. Crude oil option expires on this week, on January 17 th , and the last day of trading for the February futures contract is Feb 22 nd . Since June 2017, the future and OPEX magnets have been extended to date, which is scheduled for January 17th. The OPEX magnets that I developed are related to the “max bread” theory. this Youtube video does a good job at describing the “max bread” theory. There are free online calculators for publicly traded stocks; However, the OPEX price is higher and is calculated on individual future contracts. Disclaimer This article is written for information purposes, and is not a recommendation to buy or sell any securities. I never intend to give a personal financial advice in any of my articles. All my articles are subject to the disclaimer found here .
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