OPEC’s Crude
Nearby crude oil
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is jumping off yesterday’s six-month low after OPEC’s largest producer,
Saudi Arabia, said the cartel could cut output before its regularly
scheduled meeting in September.Â
OPEC has a standing
“price band” policy, where if a barrel of “OPEC crude”
(a basket of seven members’ oil) drops below $22 a barrel — or rises above $28
— then the organization adjusts output. Saudi Oil Minister Ali al-Naimi said
there could be a “reduction of supplies” now that oil has dropped
precipitously from the May highs.Â
But news follows price
and price often follows pattern. Last night, August crude set up in a Turtle Soup Plus One Buy
pattern and is up 3.5% or .76 to 25.65, making good on the reversal
indication. Crude is also a Multiple Days Low
Volatility contract, meaning it could make a larger-than-normal move as
volatility reverts back to its mean.Â
A look at another contract in the energies is instructive
in helping to define which contracts trading at lows might continue and which
might reverse. Look at the chart of August natural gas
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its second-lowest close in over a year last night, spurring it to register on
the Implosion-5 List.
Today, nat gas is down sharply again and provided short entry after the opening
range in an Off The Blocks
setup. But watch this contract for tomorrow. It will not register a TS+1
buy because of the same lows on July 2 and yesterday at 3.050. But this price
action is certainly in the spirit of the pattern and we could see a reversal
from oversold conditions at a significant low.