Russia has been trying to destroy US shale ever since they have been passively sitting aside eating up marketshare in the oil industry. They are using this price war to do that. Russia has been increasing production, and stockpiling for this in the short term, while Saudi has been cutting. Saudi raised production to 13mbpd after saying they had the potential for 12.3. Russia has a meeting with oil producers in Russia today and will most likely up their bpd as well. This peace talk promise compromise bullshit from Mexico saying they’ve solved the problem and will solve it again was in 1998 when Mexico was a non-OPEC producer and played the innocent guy caught in the crossfire. Mexico now produces 40% less, is an OPEC country, and has insurance on their oil production industry. This price war is going to drag on for a long time and for everyone saying woohoo I can DCA my 2021/2022 USO calls, how about just wait for a better entry point instead of watching your portfolio bleed away because you think this is the bottom.
America is not going to capitulate to Russia’s aggressive attempt to recapture marketshare and there will probably be incentives for US Oil to keep producing at a loss. Meaning even more supply with less demand due to corona virus and a global growth slowdown. It doesn’t matter how cheap it is if nobody can use it. Airlines are down, cruises are down, manufacturing is starting back up in China but will be hit in the US and EUROPE soon. Instead of being a moron and bragging about DCAing your calls just wait for the actual bottom or at least April 5th when you can see the new prices Saudi will charge for next month.
This will be confirmed by the EIA and OPEC reports with supply and demand today, and even if it is not expect volatility before a shift towards the downside.
Tldr; Oil is coming down and there will be better entry points for your USO 2021 calls so you don’t have to watch your position bleed every day.
Position – 35k in /CL 34 puts expiring June Bought at 36.3 on the random spike today.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.