We talk oil with Blu Putnam, Market Consultant and Former Chief Economist.
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Benzinga's PreMarket Prep is the #1 go-to source for everything you need to know before the market opens! Join our expert hosts as they break down the latest market trends, analyze key indicators, and provide actionable insights to help you navigate the trading day ahead.
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00:00Crude. Let's talk crude oil here. Boy, a lot of volatility because of the Middle East situation.
00:07So here you are, Blue. Help me out. Crude. Bottoms. It's 64.40 on November 11th.
00:14Trades over $78 on October 8th. Could you please tell me where the CPI reading is? What crude?
00:24Where is it trading? What date? To me, that seems to be a big mystery. Do you have that information?
00:29I got all of it. No, the oil market is trading two different views of the future,
00:37two scenarios. One scenario is China is still weak. They did all that stimulus. None of that's
00:43going to work to help the economy. It did help the equity market, but that's done too.
00:50So one scenario is the oil price drifts down because demand is weak and supply is coming back
00:56on. And the other scenario is the Middle East conflict expands rather dramatically,
01:03and oil supplies are hit. And now we're talking $100 plus oil. If you look at the options market
01:10on WTI options, you will see that there's quite a bit of open interest above $100. There's a bunch
01:18at $120, $125, and there's even a little spike way out there at $150. You only have those
01:26forecasts. Those really aren't forecasts. Let me start over. You only are worried about that if
01:30there's an expansion of the Middle East, of the conflict. And, you know, it's a low probability
01:39event, but it's been rising. So to get to your question about the volatility, the market is
01:45trading the probability weighted average of these two scenarios. And if you wake up one morning and
01:52you think Middle East is escalating, you know, oil goes up 3% or 4%. And if you wake up the next
01:58day and say, wow, nobody bombed anybody, it's down 2% or 3%. So, you know, you've got a lot of
02:05volatility day to day, but you're still in the range. You really haven't broken out because
02:11these two oil demand weakness versus Middle East are fighting each other.