Fear sweeps energy market before OPEC meeting

Scared shocked woman isolated on gray background

The Russians are coming, the Russians are coming… coming back to the energy market that is.

Crude oil futures (@CL) fell almost 3 percent today, their biggest drop this month, as traders brace for OPEC’s next meeting a week from now. The big worry is Russia wanting to add 1.5 million barrels of crude back into global markets.

Some readers may have forgotten that Moscow only agreed to work with the cartel two years ago following a brutal selloff in oil. Crude’s up about 40 percent since then and the global economy’s improved. That creates less reason for the coalition to stick together.

Investors are also dumping energy-related stocks ahead of the meeting. The SPDR Energy ETF (XLE) is the worst-performing major sector fund this week, dropping more than 3 percent. The Market Vectors Oil Services ETF (OIH), a higher-volatility portfolio tracking the sector, is down more than 5 percent.

In conclusion, worries about OPEC’s June 22-23 powwow in Vienna is casting a major pall over the energy market right now. Traders may want to expect even more volatility next week.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.