FxWirePro: Uphold call spreads to hedge WTI crude price risks ahead of US EIA’s inventory report

Today, WTI crude prices dragged yesterday’s loses below $65 mark ahead of the speculation on weekly supply data which is scheduled later in the day would release if there is a huge build-up in U.S. oil supplies.

The U.S. EIA (Energy Information Administration) would announce its inventory report for the week ended March 23rd at 14:30 GMT.

OPEC at their Monday’s Joint Ministerial Monitoring Committee (JMMC) meeting indicated that considering a 7-year average for OECD oil inventories will be helpful in achieving the normal level of stocks.

With OPEC’s initial five year OECD inventory target, they were 11mn bbl away from reaching those levels based on the latest OECD inventory data from Jan’18. However, with a 7-year average, they will be 69 mn bbl away.

Stay long December 2018 WTI $68-75 call spread: The increased geopolitical risks and the recent message from the US producers highlighting some risks to the US supply in 2018 points to some risks to US and global oil market balances in the near term.

Given the still constructive view on oil prices in the coming months, we remain happy to stay long via a call spread. This is a cautious way to gain upside exposure to higher oil prices with limited downside.

Stay long a December 2018 WTI $68-75/bbl call spread (net premium: $1.40/bbl). Marked to market at $1.3/bbl, for an unrealized loss of 10¢/bbl, or -0.16% of the underlying.

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