The Energy ReportPhil Flynn
The Phil Flynn Energy Report 08-23-2019
Oil prices have entered the rocky ranges. Trapped in a world of wild moves but still getting nowhere, as it appeared lost in a range somewhere. Of course, the moves are compelling because whatever way we break out of this range could mean a major move. We think it will be to the upside, but technically it could be a big move to the downside.
This rocky range has caused at least one trader to make a pretty significant bet. A report by Schaeffer's Investment Research reported that one options trader placed a $5.79 million dollar bet that once oil breakouts of its range, it will make a substantial move. Schaffer wrote that the trade involved buying 42,000 calls and 37,000 puts, exceeding the average intraday volume of roughly 22,000 calls and 26,000 puts.
Most of the action they say was in the January 2020 11.50 strike, where symmetrical blocks of 30,000 calls and puts traded out of the gate. It seems the trader bought the calls for $1.15 each, and the puts for $0.78, resulting in a net debit of $1.93 per spread, or $5.79 million total ($1.93 x 100 shares per contract x 30,000 spreads).
Schaffer explained that there are two ways the long straddle can profit: if USO rallies above $13.43 (strike + premium paid) or falls below $9.57 (strike - premium paid) before the options expire on Friday, Jan. 17. The further the shares move beyond those breakeven rails, the more money the trader stands to make. However, should the ETF land right at $11.50 when January options expire. the investor will lose the entire $5.79 million.
Maybe Fed Chairman Jerome Powell can break oil out of this stalemate. Some fed official overnight seemed a bit hawkish, yet markets seem not worried until they hear from the man himself.
If Powell seems dovish, oil should try to work an upside breakout. Oil dipped on weak manufacturing data yesterday after trading higher but held support and rejected resistance. In other words, oil is an accident waiting to happen and when it does, whichever way the move, the move should be big. Let's just hope that option buyer does not run out of time.
Bernie Sanders is a true socialist and we are getting some ideas on how his democratic Socialism might work. Sanders revealed his $1.6 trillion-dollar green energy plan, an energy plan with lofty and expensive and goals. It is a socialistic utopia plan, taking money from all those rich people to transform our energy industry. It includes electric cars, and carbon neutral living, and I even think a world without T-bone steaks that add to greenhouse gas emissions. It is a 10-year plan that he says will put the United States on the path to 100 percent renewable energy for electricity and transportation by 2030 and complete decarbonization by 2050. It includes proposals to boost public transit systems and build a modern energy grid. It also calls for the state to takeover the energy industry and now Mr. Sanders is suggesting that he should jail oil company executives if elected President. And why not? His mentor, KGB socialist and Russian President Vladimir Putin did that when he jailed oil YUKO's executive Mikhail Khodorkovsky because he dared challenge Vladimir Putin's growing authoritarian rule. Sanders appears to like the idea that a socialist government can jail people for crimes against the state. That whole innocent before guilty thing gets in the way.
And why would he stop at energy executives? Maybe Bernie should just jail anybody who does not agree with his philosophies? I mean all the great socialist leaders did the same thing. Vladimir, Lenin, Joseph Stalin, Fidel Castro and Mao just to name the big guys. So, if Bernie gets his socialist way, just to be safe, get on board, because if you don't you might find yourself in public housing or camp. So, I am on board just in case. Everybody has a green dream.
Natural gas is running out of heat. Gas traders fear that people may shut off their air conditioners, reducing the need for electricity and gas, The EIA gas report is not helping natural gas bulls. The EIA reported that working gas in storage was 2,797 Bcf as of Friday, August 16, 2019, according to EIA estimates. This represents a net increase of 59 Bcf from the previous week. Stocks were 369 Bcf higher than last year at this time and 103 Bcf below the five-year average of 2,900 Bcf. At 2,797 Bcf, total working gas is within the five-year historical range..
BREAKING NEWS: China is implementing a 10% tariff on U.S. Crude causing early market weakness.
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August 23rd, 2019
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