Commodity traders should understand interaction between commodities and hedgers' behaviour.
Increased hedge demand triggers speculators' net positions to rise thus the more short positions hedgers carry, the more long positions speculators take.
Speculators do this favor for hedgers in return for a risk premium which is the difference between the current futures price and the expected future spot price.
This suggest the more long positions speculators have, there is a tendency that the future spot price increases.
Seasonality analyses show that heating oil producers like to start accumulating short positions starting from July, so speculators start buying heating oil.
This year heating oil production didn't change much and the imports are minimal. So hedgers will most likely start production into early autumn while picking up the hedging demand.
That being said, investors should consider selling the crude oil and buying the heating oil as early as July the first and hold their positions until they produce a profit of 3 USD.
Crack supports this forecast:
This is going to be the time that coincides with the crack price being the lowest as it has a tendency to fall nowadays.
The COT analysis of the crack suggests that the crack longs will likely start to build and this supports the idea of buying the heating oil and selling the WTI crude oil.
So SELL THE CRUDE OIL / BUY THE HEATING OIL for a profit of 3 USD and hold it for 6 months minimum. Close the position whichever comes first.
CL1!/HO1!
Thanks for reading
Increased hedge demand triggers speculators' net positions to rise thus the more short positions hedgers carry, the more long positions speculators take.
Speculators do this favor for hedgers in return for a risk premium which is the difference between the current futures price and the expected future spot price.
This suggest the more long positions speculators have, there is a tendency that the future spot price increases.
Seasonality analyses show that heating oil producers like to start accumulating short positions starting from July, so speculators start buying heating oil.
This year heating oil production didn't change much and the imports are minimal. So hedgers will most likely start production into early autumn while picking up the hedging demand.
That being said, investors should consider selling the crude oil and buying the heating oil as early as July the first and hold their positions until they produce a profit of 3 USD.
Crack supports this forecast:
This is going to be the time that coincides with the crack price being the lowest as it has a tendency to fall nowadays.
The COT analysis of the crack suggests that the crack longs will likely start to build and this supports the idea of buying the heating oil and selling the WTI crude oil.
So SELL THE CRUDE OIL / BUY THE HEATING OIL for a profit of 3 USD and hold it for 6 months minimum. Close the position whichever comes first.
CL1!/HO1!
Thanks for reading
Trade active:
Please note that this position has been opened as of this trading day.
In general, this position is closed at the first two months.
The window of opportunity is open generally for the next 1 week (July 7). Thereafter there is a good likelihood that the position will begin to produce its expected profit (the 3 USD target).
The position has been opened at 33.33.
In general, this position is closed at the first two months.
The window of opportunity is open generally for the next 1 week (July 7). Thereafter there is a good likelihood that the position will begin to produce its expected profit (the 3 USD target).
The position has been opened at 33.33.
Comment:
This year's trade started on 34.48 as of July 1st. Now trading at 33.52. Although one can not guarantee, I suspect that this year's trade may produce its expected return of 3 USD earlier than 6 months, like many other previous years but unlike last year. Last year nothing was normal.