USO - Oil Fund - Short
The expiration short squeeze today pushed oil back to $100 without any fundamental reason. This is just a short squeeze regardless of what the news sources are telling you.
There was a refinery explosion in Big Spring Texas that knocked 67,000 bpd offline for several weeks but that should have no real impact as we move into the low demand cycle between winter and summer. Refinery utilization was already down to 85% simply because refiners did not want to refine gasoline into a declining price market. There is plenty of available capacity to cover for the 67,000 bpd loss.
Venezuelan big mouth said he was "not serious" about cutting oil sales to the U.S. and said he may sue Exxon instead. He has no place else to sell his oil because it is a specific grade that can only be refined in at American refineries. Venezuela is not a problem but is being blamed for the spike.
OPEC is the only real problem and one spokesman said there would be no increase and no cut with production likely to remain the same during the decline in demand and that would allow inventories to rebuild.
March crude futures cease trading today. This expiration short squeeze has given us a nearly perfect entry point in our USO short.
I am changing the strike to reflect the $4 move in crude. The USO is currently at $78.66. I am recommending we buy the April $77 put UNA-PY currently at $3.50.Jim Brown