ERX: Crude Oil Pricing Power Now In The Hands Of OPEC, Russia

Summary

  • OPEC’s decision reflects changing fundamental dynamics.
  • Drill-baby-drill is dead.
  • US production is falling, and that will continue.
  • The end of the pandemic will cause demand to surge. Here are three signals that crude oil will continue to make higher highs.
  • ERX is a trading tool for trend-following as the sector rotation continues.
  • Looking for more investing ideas like this one? Get them exclusively at Hecht Commodity Report. Learn More »

Last week, nearby NYMEX crude oil eclipsed the early January 2020 high and critical technical resistance level at $65.65 per barrel. Just five months earlier, on November 2, 2020, the energy commodity traded to a low of $33.64.

The price of crude oil has nearly doubled as the bullish stars lined up for the energy commodity. Since 2018, a roaring stock market did little to support the prices of energy-related shares. The leading US oil companies and related businesses watched as their share prices evaporated. When stocks rallies, they did not follow. When stocks corrected lower, the oil companies led the way on the downside. In March 2020, when risk-off selling hit markets across all asset classes, traditional energy stocks plunged. After a recovery, the fell again in early November when Democrats captured the White House and both houses of Congress with promises of addressing climate change by ending production and consumption of fossil fuels.

Meanwhile, sector rotation in the stock market can be a powerful force. In a sell the rumor and buy the news reaction, we have seen a substantial recovery in oil-related shares as the price of the energy commodity continues to climb. The oil market seems to be telling the world, be careful what you wish for as the process of ending dependence on hydrocarbons could lead to a prolonged period of price appreciation.

The Direxion Daily Energy Bull 2X Shares (NYSEARCA:ERX) is a short-term trading tool that holds a turbocharged position in many of the leading US oil and oil-related companies.

OPEC’s decision reflects changing fundamental dynamics

Last Thursday, the oil ministers from OPEC and the Russians agreed to keep oil production steady, meaning that the output cuts addressing the global pandemic will remain mostly in force. The news came as nearby NYMEX WTI crude oil futures remained

The Hecht Commodity Report is one of the most comprehensive commodities reports available today from a top-ranked author in commodities, foreign exchange, and precious metals. My weekly report covers the market movements of over 20 different commodities and provides bullish, bearish, and neutral calls; directional trading recommendations, and actionable ideas for traders. 

This article was written by

Andrew Hecht profile picture
28.21K Followers
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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