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Trading Crude With A Short Bias


In the last week of April, I wrote in these pages that even though the chart for crude futures (CL) was flashing a buy signal, fundamental factors had a bearish tone. As a result, I said that I would be trading with a short bias, looking for a pullback to the mi-$60s. That level was hit just four trading days later…

Then, in mid-May, when the market barely reacted to the news that the US was buying to replenish the Strategic Petroleum Reserve (SPR), I again took a bearish stance. Nothing had changed then in terms of the fundamentals. US supply was still increasing, reaching near pre-pandemic levels, and there was still a lot of uncertainty about the future of the global economy. This week has seen more news that could be considered positive for oil prices being pretty much ignored, and once again that lack of a reaction speaks volumes.

When I mention positive news for oil I am talking about things like a new phase in the Russian war on Ukraine, where Ukraine is now successfully attacking strategic targets deep inside Russia, including a drone attack on Moscow. The oil embargo placed on Russia by most Western nations following the invasion of Ukraine has proven so far to be ineffective, with Russian oil still hitting the market, albeit at a discount. But, if drones can hit Moscow, then oil facilities and pipelines should be reachable too, making a real disruption of supply possible.  

Then there is increasing evidence, including from Thursday’s ADP…

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EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
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