Help is on the way…

or is it?

Whenever I start getting bullish on crude oil, I look at the weekly US oil stocks chart from the EIA’s This Week in Petroleum: (https://www.eia.gov/petroleum/weekly/)… Seasonally, we are a few weeks away from increased refinery activity and some reduction/relief in crude stocks… I expect the current rally to begin to run out of steam around $40/$43, WTI, eventually carving out a trading range perhaps from $30 to $40… Traders are more willing now to sell options… (By the way, producers with drilled but uncompleted wells are natural call sellers with strike prices corresponding to break even or profitable levels.)… Volatility has already moved down to around 45% from a high of close to 80%… But we could see an additional 10 point decline as we move through the spring, should the trading range I expect reveal itself…

Yesterday, a large option trade in spread options took place in calendar 2017… A 12 month strip of +$.50/+$1.00 call spreads traded 750x per month, settling at $.05… The buyer might expect not only a balanced market but backwardation to return by 2017…