Strategic trade
Trade view / 07 June 2016 at 9:48 GMT

#SaxoStrats. UPDATE: No fireworks above $50/b

Head of Commodity Strategy / Saxo Bank
Instrument: OILUSJUL16
Price target:
Market price:
Since this #SaxoStrat was initiated on May 27 WTI crude oil has settled into a range of less than $2.50/barrel which is probably the tightest range seen since the Christmas break last year. Positive momentum has faded but negative price news, on the other hand, has been used as a buying opportunity.
It is also clear from the lack of price movements despite major events during these past couple of weeks that crude oil has hit a sweet spot where buyers are reluctant to take it much above $50 while the longer term outlook continue to attract buyers at lower levels. 

Volatility is undoubtedly going to pick up again but in the short term the attention is firmly on whether oil can and will be able to move higher without triggering a supply response from high cost producers.
Based on entry levels, our buy stop is currently located at $50.75 and we are happy to keep it at this relative tight level.
Earlier today, Peter issued a relative long bet on Subsea 7 hedged against the OBX. Considering the holding period of a couple of quarters this relative trade and the WTI short can easily live together. Should we see a correction in oil a better buying opportunity may present itself with the expectations that the changed sentiment in oil markets would only trigger a relatively small correction in the region of 5-10%

— Edited by Michael McKenna

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John Roberti John Roberti
Dear Ole,

I have not been able to find data on Alberta resumption of oil production… Do you have any?
Saxo Paris morning letter talks about the discount that Saudi Arabia is offering on its crude not only to China but also to Europe to promote its oil. They bare reported also embarking on serious austerity programs that would substantially cut civil servants payroll!
Last Friday night, it was reported on forex factory the a few rigs were added to the us fields, quite a change from continuing decline! Can this be considered a factor, or not, in the possibility that us production would stop to decline this week?
Apparently the situation ijn Nigeria sabotage is improving allowing resumption of partial production Could you comment on these issues? Thanks in advance
Ole Hansen Ole Hansen
I have no data on Alberta at this stage.
Saudi Arabia actually increased its OSP (official selling price) to Asia and U.S. for July siting strong demand for its crude. Last July the Saudis sold oil to Asia at a flat rate compared to the Platts Oman/Dubai benchmark while this year they have raised it to 60 cents over.
The U.S. rig count rose by 9 last week. This was only the second weekly rise this year and could indicate some stabilization coming following the recent price recovery. It is estimated that there is a time gap of at least 3 months between prices impacting the rig count. So developments here will be watched closely over the coming weeks and months.
Nigeria production has collapsed compared to what the country produced at the beginning of the year. This combined with the renewed dollar weakness and expectations of an inventory drop Wednesday has supported the renewed attempt to extend the rally above $50/b
John Roberti John Roberti
Thanks for tyis pak of information
John Roberti John Roberti
sorry for typos! Thanks for this pack of information
mgdogan mgdogan
Ole are you long at 50.7? What is your target 57 maybe?
Ole Hansen Ole Hansen
@mgdogan. No we initiated a short trade in July WTI crude oil on May 27 which after having been trading sideways ever since now approaches our stop which is just above at $50.75.


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