Crude oil surged higher mid-morning on a better-than-expected oil inventory report from the Energy Information Administration (EIA). As a result, you should have been stopped out of your inverse crude oil ETF holding, ProShares UltraShort Bloomberg Crude Oil (SCO).
That stinks, but the upward move in crude oil looks overdone to me and I’ll be looking for another opportunity to re-enter the trade once the dust settles.
The EIA claims that crude oil inventories fell by 14.5 million barrels last week, when markets were looking for an inventory build, but there’s more to the story.
The so-called drawdown in oil supplies should prove short-lived, because Tropical Storm Hermine disrupted shipping and offshore oil production in the Gulf of Mexico last week when the data was collected. So the numbers are likely skewed by the weather.
Either way, you should be out of SCO right now and it makes sense to stand aside until the “noise” in crude oil futures subsides. Then I expect to see the true trend reassert itself.
Best wishes,
Larry
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