Blue Lacy Advisors, LLC - Late December Crude Oil Commentary
Minneapolis, MN | January 10, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
Oil is on pace to end the week higher by 5-6%, with the front months in the ranges of $75-80 (WTI) and $79-$84 (Brent). As expected, volume continues to be low. Since peaking at a combined ~927k lots on November 18th, trading volume in January and February contracts of WTI and Brent has trended lower, averaging just 688k contracts over the last five days. This is one reason technical trading has recently played a prominent role in the model’s component analysis. Lower volume, higher volatility, and an ongoing bearish price trend can create a self-reinforcing cycle. Within the same category, the forward curves have flashed bearish signals, though probably exaggerated by the roll at times. Brent’s curve is backward across the 12-month strip, excluding 1 v. 2, where the roll effects are strongest as we approach the end of the month. WTI is trading about flat in the front months and similarly backward beyond the first quarter. This seems to be generally in line with analysts’ latest consensus view that demand should rebound in the second half of the year.
*This summary is based off December 23, 2022
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Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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