Wednesday, March 11, 2009

Crude Oil Update



Crude oil sold off today based on a government report showing a larger than expected inventory gain and a drop in fuel consumption hitting a two-month low. USO (crude ETF) was down $1.53 closing at 26.30.

Looking at the above chart you can see that USO has reached the 50% retracement level of the last move up. I'm still bullish on crude oil as this is usually the time of year where the seasonal rally begins. A move down below the low from last month would negate my bullish outlook.

5 comments:

Paul D said...

Ya, oil seems to be a safe place right now. I'm not familiar with USO crude oil though, why do you follow this compared to the regular oil futures?

Kevin said...

Hi Paul,

The United States Oil Fund (USO) is a domestic exchange traded security designed to track the movements of light, sweet crude oil. I'd rather trade the ETF than the futures because the futures have an expiration date.

Anonymous said...

Are you aware of the contango issues with USO? A strong headwind to overcome if you are long.

Andrew

Kevin said...

Yes I am and are you aware that the spot month is beginning to gain on the back months? The spread last week was 1.66 between April and May....now the spread is about 94 cents which is a sign of demand...I'd love to see the spot month trade at a higher price than the back months.. we'll see what happens... Thanks Andrew..

Anonymous said...

Kevin,

Thanks for the reply. That does seem like a positive, also USO presumably does quite well from backwardation when it's there, I'm not aware of a perfect vehicle to play an oil long, they all have issues perhaps.

Cheers,
Andrew

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