Schork Oil Outlook: Can Bears Win Now?
Are the bears ready to play varsity?
Oil bulls must now put up an inspired defense in the mid $70s for Nymex crude oil (WTI) after their latest foray above $80 ended so miserably.
Just two weeks ago they seemed to be in good position to mount a run at the 87.15 high in the spot market (92.18 for the September contract) from early May. On August 03rd September barrels finished at 82.55 and the market was trending higher, i.e. up 19% since May 25th or since the bottom following the implosion after that 87.15 high print from three months ago.
More importantly, as crude oil was rising, oil volatility (OVX) was falling, from 47.2% in early June to 32.1% last Friday, a decline of 32%.
Thus, as prices were rising, uncertainty was falling or rather, confidence in the move higher was growing. In this vein, volatility has risen by 7.9% over the last eight sessions. At the same time, September WTI has dropped by 8.7% and finished Friday at 75.39. In other words, it has been an orderly pullback in prices.
To be honest, this part of the selloff was the easy part for the bears. Now they have to step up and play the varsity. To wit, analysts at The Schork Reportexpect to see solid support from this point on as bulls scramble to defend. After all, if they don’t, then we next have to start talking about sub $70 spot crude oil.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.