Heating oil rallies on expectations of bad winter

Crude's geopolitical rally nears pivot area

The energy markets are certainly feeling the effects of increased uncertainty and tensions in the Middle East, with the focus on Syria and Turkey. Crude oil, after experiencing a swift drop to the key $88 level, has rapidly reversed course and now is up around 1% this morning, trading over $93.  This $93 level is our key pivot for this market. We call this level the decision level. If crude can hold above $93, we look for a bullish trend to resume. If this rally is short-lived and crude can trade back below and hold below $93, we look for the bears to take control again and bring this market back to $88 and possibly $82. However, middle east tensions seem to have a hold on this market thus putting in a potential floor at $88. Natural gas, after some slight profit-taking has resumed a bullish move and is now close to its recent high. Heading into winter, these markets might continue to show strength.

We focus on heating oil today. Heating oil dipped below $3.00 per gal. very briefly last month, but could not hold below that key level. After putting in a lower low at around $3.06 earlier this month, heating oil bulls have been in control, and this market is trading above its first resistance level of $3.22 and approaching the next key level at $3.27. This market looks strong to us, and again especially heading into winter, bulls may keep control of heating oil through 2012. Our key pivot for this market is $3.18. Now, heating oil is holding above $3.18. Furthermore, the Energy Information Administration stated today that U.S. households that mainly use heating oil to warm their homes should pay 19% more for it this winter compared to a year earlier based on expectations of a colder winter and as low distillate stocks and new fuel regulations drive up prices.

About the Author
Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.

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