Thursday, August 18, 2016 was rollover day for crude oil. Traders are now looking at the October contract as the front contract to trade as the September Contract nears its expiration date.
The last day of trading for the September contract is Monday, August 22, and you should roll any positions over to the October contract. Crude oil continued its rally as it traded above the 49 handle for the first time since July 5th.
US dollar weakness and expectations for a freeze in output from major oil producers have fueled the rally. The US dollar September futures contract has declined from a high of 97.62 on July 25th to a low (so far) of 94.05 on Thursday, August 18, 2016. This has helped support crude oil prices.
Traders are foaming at the mouth assuming Saudi Arabia’s acceleration in increasing crude oil production to successive record levels means they are going to possibly be amenable to an agreement to freeze its production at these levels.
Producers and consumers of crude oil meet at the end of September at the International Energy Forum in Algeria. OPEC – NOPEC have tentatively agreed to discuss holding an informal meeting to be held during the Forum.
It is really interesting that traders are excited that producers who all near production extremes could possibly agree to freeze their production at these high levels. Yes, this time it’s different; after all how much more crude oil can Saudi Arabia produce?
The Saudi’s have hinted production will reach a new record of 10.8 – 10.9 million bpd in August, Iraq has said they are looking to increase production by around 350,000 bpd to 4.6 million bpd in 2017. Iran hasn’t said they will attend the meeting and they are still short of attaining their 4 million bpd goal.
They will then shoot for 4.6 million bpd by 2020. Production freeze indeed. The thinking seems to be any freeze potential is good freeze potential. The anticipation of the supply glut possibly going away has traders enthusiastically bidding up price. The reduction in gasoline inventories has traders betting the rebalancing is underway.
High 49.05
Low 47.28
Last 48.96
Daily Pivot Points for 8/19/16
R2 50.20
R1 49.58
PIVOT 48.43
S1 47.81
S2 46.66