Oil collapsed yesterday in a dramatic rise in volatility. I'll spare the deeper economic implications of collapsing oil since we have the complexity of an options expiration possibly exacerbating the price action.
December options on futures contract expire this afternoon. There is net open interest in the ATM put options of over 7,900 contracts.
Following the break of 56.25, I computed 55.47, 54.69, and 53.91 as possible targets yesterday. We have traded as low as 54.75, so these are certainly in play.
Looking forward, a swing low to 54.69-53.91 is possible. If that fails to occur, then 56.25-57.81 is highly probable. The opposite move is more violent if what we anticipate fails to occur.
Looking at our abnormal block volume monitor, the work was picking up large volume block volume trades in ETFs USO and DBO. We recall DBO provided early warning of a floor in oil two years ago, long before the ascent took place. Derivative and out-of-sequence block prints are hidden gems of insight we track.
EIA Inventory Report is Thursday morning and whether supply exhibits cuts that align with OPECS reduced demand forecast will be scrutinized.
Broad Levels are below.
All the best,