Daily Gains Letter Weighs in on Oil Prices and How Investors Can Play the Uncertainty
Daily Gains Letter advises on the current state of oil prices and how investors can make the most from the uncertainty.
New York, NY, United States – April 22, 2015 /MarketersMedia/ —
Daily Gains Letter (www.DailyGainsLetter.com), an e-letter published by Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, is weighing in on how near-term oil prices are a trader’s market and how investors can play the sector’s ongoing uncertainty.
“Uncertainty appears to be influencing oil prices near-term and the long-term outlook doesn’t look to be showing much strength. For the time being, oil prices are stuck in a trader’s market,” says financial analyst George Leong. “On one hand, there appears to be support at $40.00 for West Texas Intermediate, as the price for the May futures contract has been bid up to the $52.00 level.”
Conversely, Leong expects to see some resistance selling, as oil prices edge higher due to the record oil storage and the fact that the global demand side continues to be a major overhang. For one, China is importing less oil than the previous year as the country battles economic stalling.
The wildcard situation with ISIS and Iraq appears to have stabilized for the time being. Moreover, if a highly tentative nuclear technology framework with major oil producer Iran is eventually struck, investors could see a gush of oil flowing out from the country and pressuring oil prices. (Source: Allen, K., “Iran nuclear deal puts oil prices under further downward pressure,” TheGuardian.com, April 3, 2015; www.theguardian.com/business/2015/apr/03/iran-nuclear-deal-oil-prices-pressure-crude-exporter.)
“Looking ahead, WTI futures point to oil prices rising to the $60.00 level by June 2016 and $64.00 per barrel by December 2017; the direction is clearly higher. We are also seeing a spike in open interest on options strikes at above $60.00, which suggests a bullish view towards the price of oil,” Leong adds. While he cannot say with conviction where oil prices will be a year from now, Leong believes that the commodity will likely continue to be a quick trade, not a buy-and-hold situation.
Oil prices in the U.S. will largely be dictated by the downward pressure on the number of oil rigs moved to the inactive list. More than 50% of all rigs searching for oil domestically have been shut down; this has helped to support oil prices, but the fact that prices have not surged quicker suggests the downward bias in the commodity and the continued fear of oversupply and lower demand. (Source: “North American Rig Count,” http://phx.corporate-ir.net, April 17, 2015; http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother.)
“The near-term direction of oil prices will largely be driven by supply and demand data, along with the situation with ISIS and Iran. Whether you are trading from the short or long side, it will continue to be a trader’s market, so look to snap up profits after moves,” Leong concludes. “Any major weakness in oil prices should be viewed as a long trade, while surges should be met by profit-taking or on the short end. Investors can also play this trade via call and put options.”
For more information on Daily Gains Letter, visit www.DailyGainsLetter.com. Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com.
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