As people across the nation scramble to find that perfect turkey recipe combining butter, sage, rosemary, thyme and parsley, so too are traders, looking for that perfect balance of taking risk off and risk protection ahead of a holiday shortened week and an OPEC decision on the horizon. With WTI coming off its first down week in the last 6, as of 12:15pm EST, the selloff continued with West Texas Intermediate for January delivery down $0.53 at $56.18, Ultra Low Sulfur Diesel down $0.0217 at $1.9267, and Reformulated Blendstock for Oxygenate Blending (RBOB) down $0.0067 at $1.7375. As market participants continue to feel “on edge” ahead of the OPEC gathering in Vienna, geopolitical uncertainty in the European Union didn’t help the cause with news that Germany has been unable to form a coalition government. The dollar’s move higher overnight hit the majority of commodities including the energy sector. The correlation coefficient is not necessarily consistent between the dollar and crude, but sharp reactions in the dollar can affect commodities and vice versa. Below is a DXY (dollar index) chart:
With the anticipation of light volumes from now until the beginning of next year due to the holiday season, we are most likely in holiday volatility mode. Get ready for wider than usual intraday ranges and aggressive price moves in one direction or another for no apparent reason. Thus the buttoning up of positions by traders heading into this holiday season. For now, we await any drastic supply and demand shifts from the APIs tomorrow and the DOEs on Wednesday. In regard to that perfect recipe, maybe it’s just as simple as family, food, and football.