Friday, December 11, 2009

CO1 - Crude - Brief Technical Review - 12.11.0

I just want to do a brief commentary on the overall trend of Crude. I forgot to grab CL1 of the bloomberg but CO1 works just as well. Its clear via the first and second BB analysis that prices need to revisit back up to the mid to high 70's before establishing a concrete trend.

In other words: "short term bull" until price range of 75+

Relation to Equities and correlation thoughts:

If you look at the month of november CO1 traded similarly to the SPX. A flat trend developed with a range of about 75 to 80 which eventually came to a price squeeze (currently spx is experiencing a price squeeze). Interestingly enough the price squeeze with oil led to the downside (prices currently around low 70's). The break to the downside could possibly be explained by the trade data. My colleague Pat put up a excellent post <-- click here on this a few days ago. To an extent the SPX followed, as prices went from 1100+ and fell to 1090, but held at 1085 support (continuing a flat trend/side ways trading) which exhibits a limited correlation. (in other words playing the equity oil corr may not be such a good idea).

Price Behavior:

Much of this flat pricing/sideways price behavior in NOV oil trading can also be explained by seasonality factors (weaker demand: seen via trade data). Interestingly enough though, winter is yet to be in full force. Crude will probably be in the 70's range through first Quarter 2010.

Crude the past few quarters has tended to make wide higher highs on a monthly basis. Overall, the long term general trend on a quarterly basis is bullish. If Oil can maintain in the 70's range for the first quarter, establishing a new range in Q2 is quite possible when seasons change and demand picks up.


Short Term: trade up to 75+ re-examine
Mid Term: ? to lateral
Long Term: on a quarterly basis bullish if ranges hold


Alexander Lê
Analyze Capital LLC
Managing Partner


  1. I'm definitely bullish at these levels. How can one not be? I agree with your analysis of room up to $75. I need to start trading Futures contracts and soon! Check my post on the monthly IEA report on oil. Especially forecast growth.

  2. Hey Alex, I saw the first release of this post and you made it much more clearer, thanks.
    As I write CL1 is below 70 and I agree that it could be seen as an opportunity. My concern before going long is more about the USD, if the rally keeps go on in the short term (EURUSD went from 1.52 to 1.46 in a week with two days flat) it could impact badly your short term oil play no?
    Maybe the idea if you play this from 70 to 75 is to set up a "Oil in EUR" strategy (Long CL1 - short EURUSD).
    This said, as you know, I'm still assessing the oil market before trading on it for the medium-long term and these posts are highly appreciated and allow me what to look at. Thanks again, Sauros

  3. great thank you so much for the feed back, as I have been informed in the past that I can be confusing sometimes. You should check out pat's fundamental comments and analysis. You can get more deeper insight. Ill try getting a blog up on the the way the industry is structured if i can find my notes on it.

    You also bring up a good point about the EUR/Dollar relation. Oil is perhaps is being more affected by short term (monthly) seasonality, and supply/demand factors. But the currency corr will be kept in mind and monitored closely.



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