Strength in crude well within recent range

June 2, 2015 10:02 AM

All quiet on the energy front for the most part with WTI crude above $60 in an apparent bid on the slogging U.S. Dollar.  

Nonetheless, the price discovery remains well within the range that has been set forth over the past several weeks trading between 57 and 62 dollars.  The market will most likely spend the balance of the week within this range, possibly testing the high and/or low boundaries as the street waits on Fridays OPEC meeting. The unfortunate news for those looking for a breakout is that the most likely outcome of the probable non-event is that the cartel stays the current course without much deviation or fan fare.  While we could see some price movements from the weekly inventory data or some other developing fundamental noise, it would be hard to imagine any exaggerated move prior to confirmation of the status quo from a production standpoint being announced. 

Continued tight trade in the natural gas contract is ever increasing the likelihood of a substantial move in the near future. Support at 2.55 remains intact and relatively untested as does the resistance at 2.83. Violations and daily settles through those levels would be needed to increase the odds of follow through in those respective directions. With the price trading at such discounts to even very recent levels, the risk reward in the options market for long positions is intriguing. From a supply standpoint very little has changed in months. Demand economically is strong as well, though weather demand has been sluggish with cooler than expected temperatures.

The Greek debt issue is raising its head again as the deadline for funding is the end of the week and it seems that the Greeks are once again proposing a restructuring of the terms. While this does seems to be news in the vein of ‘the sun coming up once a day it is creeping into the overall price discovery ever so slightly as traders consider the possibility of a default. This can have a dampening effect on demand for energies yet I would guess it would take an actual default after so many times of crying wolf to have any real effect on price discovery outside of the directly related euro currency.  

About the Author

Tory Enerson is a senior market strategist with the Zaner Group in Chicago, an Independent Introducing Broker. He has been in the futures industry for over 20 years. Beginning his career at the CBOT in 1990, Enerson worked his way up through the industry when he became a member of the CBOT in 1998 and traded for over a decade before beginning to work with clients as a market strategist.