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Commentary

-1.2 MBPD = -660K Cut

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That is the way the Department of Energy sees the OPEC production cut. Of the -1.2 mbpd OPEC claims it will cut starting on Nov-1st only about -660,000 of that will translate into additional real cuts. Some countries have already cut production and others can't even make the old quota so lowering it does not do much good. There is also the 30-45 day shipping time from OPEC ports so any real price improvement from the cut will be long after Thanksgiving. We should see price gains from rising winter demand before the gains due to the cut. The breakdown of the OPEC cuts by country are listed in the table below. The price of oil shot up to $60.50 in overnight trading on the final announcement but it was short lived and plunged back to close at $56.82 on Friday. That was also the last day of trading for the November contract so those traders hoping for a lasting post OPEC spike were racing to the exits in panic. The December contract closed at $59.42 and will become the current contract on Monday.

Table of OPEC Production Cuts

Chart of December Crude - Daily


This will be a very different newsletter than the ones you received in the past. I continue to get requests for additional trades as well as for trades in other sectors. The energy focused newsletter will remain but I am going to increase positions in non-energy sectors. In order to do this I am changing the format of the newsletter. Instead of listing the same old updated charts for 20 positions each week I am only going to show charts for new positions or for those, which have changed significantly. Everyone has a charting program and their own style of chart they prefer. This will save me a substantial amount of time and allow me to broaden the net significantly. It will also cut down significantly on the size of the newsletter.

As energy investors we should be ecstatic. We waited patiently with oil making new highs for the lows we knew would come in late September and early October. We targeted entry positions to correspond with $65 oil and added to those positions at $60. So far everything is working perfectly with nearly all our positions profitable despite oil closing at $56.82 on Friday. We laid out our plans well in advance and then executed those plans. Now, while those positions are maturing over the coming months we will try and take advantage of other opportunities.

I am going to spend my efforts writing about things that impact the energy sector and about new plays rather than rehashing the old positions every week. Let me know how you like the new format at jim@optioninvestor.com. This is energy earnings week and there are plenty on tap. The biggest companies, Exxon, Chevron and Conoco will report and together they make up 9% of the S&P. Current plays with earnings next week include XTO, NBR, SU and DO. The majority of the rest report on November 1st and 2nd.

Jim Brown

Energy Earnings Calendar

 

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