RE:MigraineYes, it seems shorts are doing very well, better than I am...
We have a debt ceiling deal now working its way through the system, a few more day's grace by Yellen allowed it to be kicked around the halls longer by those opposed causing turmoil and doubts, and it is not yet approved by house and senate. This will be resolved by early next week.
We have just got bad economic growth news from China today, which will take the wind out of many long positions, and allow for oil to drop a bit more at least in this short term period of uncertainty. A global recession is one step closer today as China's industrial recovery stumbles. Yet they still are importing huge amounts of crude, and have big stockpiles too.
We have a divided OPEC going into a June 4 meeting, with some members wanting to cut, and some like Russia wanting no cuts. If there is a positive thing about it, these lower current oil prices with fears of a demand drop may sway some members opinions to vote in favour of a cut. It would not surprise me if Saudis and others are in the background driving the price down now prior to the meeting temporarily in order to get consensus. Tough to speculate what they will do, but with the current market sentiment, I think no production cut would allow oil to fall even further as bulls are keeping markets up now hanging onto that hope.
Tomorrow June 1 at 11:00 AM we have EIA numbers delayed one day due to Memorial day. After last weeks monster draws, will the steep draws continue or was last weeks drop a matter of data timing?
Gasoline and distillates prices have dropped again today, with crude following as crack spreads tighten.
Nat gas is weak, and promotes oil to gas switching where possible.
Bullish fundamentals still remain, yet the market is focused on immediate moments and news of the day. If bullish fundamentals is indeed correct then one would think that as time goes on the sector shoud be headed up not down. From past experience I know that one could be right with fundamentals, but wrong in price directions as the market can move irrationally in the opposite way for overextended periods.
I see the US energy sector as a whole has not dropped as much relative to oil's drop. Compare a chart of XLE to WTI. Producers have fallen, but are still quite strong.
Then on Friday, we have Suncor's ex dividend date June 2.
By this time next week we will know a lot more if the debt ceiling had been raised, and also where oil and oil stocks will be headed with an OPEC decision.
In the meantime, my strategy of taking large positions and holding long through this uncertainty has indeed been costly, and I have had to trim some long positions to maintain margin requirements.
At the moment with WTI down around $67.40, and index futures down, I expect today will be another down day like yesterday, but one day closer to the other side.
Experienced wrote: Further to your post a while ago - looks like the people who shorted oil are doing OK.
Thoughts?