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Be flat on both contracts now

Published Monday, September 28th, 2015

The headline above somewhat contradicts the message from last Friday. It was to try and run ICE short positions and reduce NYMEX short positions to supports. This change of heart comes from the fact that the ICE October contract expires tomorrow and NYMEX tonight. Both of them are below the November contracts and it is not entirely clear whether the November contracts will take over the roles of their predecessors or after the expiries the current negative sentiment will disappear, the trend will reverse and resistances will be under pressure.

November ICE: The extent of the contango on the front end is about 175 points. The downside objective at 39.50/40 on the October contract is the daily lows from the end of August. The November equivalent of it is 42.45/50, well above the current price level. Under these circumstances it is best to take profit on October short positions and wait a day or two to decide whether to short the November contract. If it dips and closes below 41.30/29, the continuation lows on May 5 and 26 tomorrow then shorting the new front-month will be advised.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.