The impact of the Coronavirus on Crude Oil

With news of the virus spreading concern over the price action on several commodities needs to be addressed. First no one knows how far the virus will spread at numbers of casualties and infected continue to rise and the W.H.O. has not declared an international virus alarm. However, we have seen equities get hit with the MSCI China Index down over 10% on the day. Bond futures continue to rally, and casinos, hotels and airlines have all declined during the session.

When looking back at 2002-2003 SARS outbreak we saw jet fuel demand drop 170,000 barrels/day and the total demand drop over 250,000 barrels/day. Since that time, air travel has nearly doubled and with the Chinese New Year on Saturday, we could see this number slump even further.

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Technical Perspective

With the sharp break in March futures over the past four sessions, stochastics and MACD have pushed deeper into oversold territory indicating that the market has gone into a bear trend. First level of support is now closer to $52.50 and the average true range has now run up to $1.85 indicating that volatility has exploded. Continue to attack the downside and consider longer dated call options as a partial hedge against any potential geopolitical risk.

Good luck and good trading,

Phillip Streible

Chief Market Strategist


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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures; LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results

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