Yahoo Finance’s Alexis Christoforous and Scott Bauer, Prosper Trading Academy CEO, discuss the latest oil moves amid vaccine optimism.
ALEXIS CHRISTOFOROUS: Stocks aren't the only thing popping today. We have got crude oil prices enjoying their biggest one-day gain in six months. Jared Blikre is here now with a look at that. Jared.
JARED BLIKRE: We got crude WTI settling up at 8 and 1/2%. We haven't seen a move like that in, you just said it, six months, good for $3.15. And just looking at our commodities heat map here, lots of green, with the exception of silver and gold and some others there. But in WTI, you can see it's still down about 34% year-to-date and still relatively trading sideways, although we have broken above $40 a barrel, and that is notable.
We were talking about potentially a new trading range last week between about, say, 34 and 35 and 40, well, maybe we can get back above 40 right now. Just want to take a quick look at the energy sector, as well, because we have some of those stocks on fire. Exxon and Chevron to your left, each up more than 12%. And then some big outsized winners, you look at Diamondback, that's up 31%, followed by Murphy Oil, 26%, so some really big gains in the sector overall today, Alexis.
ALEXIS CHRISTOFOROUS: All right, now I want to bring in Scott Bauer, CEO of Prosper Trading Academy. Scott, I've been talking to some traders today, e-mailing with them, and they're telling me that the rise we saw in oil was because of the good news on the vaccine front from Pfizer means that we might see the economy come back more quickly, and therefore demand for oil will be up. Do you buy that? Or was this just an excuse to get in to oil at these levels?
SCOTT BAUER: No, I definitely buy that. I mean, there's a lot of validity behind that. But I'd be cautious here because, as, you know, you guys were just talking about, it is at the upper end of the range now.
Oil's been trading in such a defined range for the last, let's call it, three, four, five months here, of 35, 36 on the downside, maybe 40, 41 to the upside. This could be an opportunity for some shorts to come into the market. But I absolutely believe there is some validity behind the rise today because of a vaccine and the hope that all of a sudden it's not demand destruction anymore, that demand starts picking up sooner rather than later.
ALEXIS CHRISTOFOROUS: I want to talk about what a Biden presidency is going to mean for oil. Should investors be worried or concerned that Biden wants to relax measures on Iran and Venezuela, because this could potentially bring more oil to market and depress prices?
SCOTT BAUER: Concerned, yes. Is it likely in the near term? No. Any sort of change is going to take a very, very long time. You know, it's going to be probably years before we would see any sort of strategic change like that. So is there a concern? Yes, in the interim. If I'm looking out six to nine months, I don't think it's a worry at all.
ALEXIS CHRISTOFOROUS: You talked about that range for oil prices. Jared was saying that last week we were talking about it being between, like, maybe 34, 35, and 40. OK, we've blown past that today. Where do you see the short-term range for crude?
SCOTT BAUER: I really think we're at that-- almost close to that upper end of the range here. I would be really surprised to see a print above 41, 41 and 1/2 or so. Until we break out of that range, which has just been so clearly defined, like I said, there's going to be a lot of shorts coming into this market right around the 41 and 1/4, 41 and 1/2 area. So you know, unless we get some further follow up, maybe another company coming out with a potential vaccine that has just as, you know, good efficacy as the one by Pfizer, I think it's going to be really tough to break out of that.
JARED BLIKRE: Hi. Jared Blikre. You know, we've been talking about the majors and a lot of them are just down 40%, 50% year-to-date as well. You know, Exxon had to make this huge pivot earlier in the year. Can they relax somewhat? Can they repivot? I'm not expecting a 180 here--
SCOTT BAUER: Right.
JARED BLIKRE: --but are they able to incrementally adjust their plans to take advantage of this good news here?
SCOTT BAUER: I think that they can be cautiously optimistic. I think they can look at what they did and say, OK, we're on the right track here. But they can't let up their guard, because yes, we all hope and pray, number one, that not only is the vaccine effective, but that it can get out sooner rather than later.
However, the reality of it is, we're probably at a good six months before that's going to happen. And this is not the pessimistic scenario. This is the realistic scenario. So can they let up their guard? No, but they're certainly moving in the right direction, in my opinion.
ALEXIS CHRISTOFOROUS: Hey, Scott, you know, Saudi Arabia said that OPEC-Plus output deal could be adjusted to balance the market. Do you see that happening? And what would that mean for prices?
SCOTT BAUER: That I could absolutely see happening. And I think they meet beginning in December, so what is it, about three weeks or so. So they can definitely adjust their platform or their schedule moving forward.
I think it's probably a very low chance at this point, because I don't know that they're going to act just on the fact that, you know, there's potentially a worldwide vaccine right now. However, verbiage, I can absolutely see them saying that. And if they do adjust and relax a little bit, we could see absolutely a trade out of that range that we were just talking about in crude.
JARED BLIKRE: Wanted to get your take on some of the other energy markets. We've been talking about crude oil, but also looking at RBOB gasoline futures, they're up 7%, heating oil 6%. Anything else you're noticing in this space, and especially with natural gas as we progress into the winter here?
SCOTT BAUER: Yeah, natural gas, you know, that was, you know, I don't want to say left for-- you know, throwing out the baby with the bathwater a while ago, but that has rallied incredibly. And coming into the winter months now, you would expect that rally to really sustain itself. In terms of the RBOB gas futures, you know, that one remains to be seen to me.
Again, you know, there's been such a demand destruction, is that going to change? I don't think it's going to change overnight. But we might start seeing some pressure on the upside there with all the rest of the news in the commodity space and along with the vaccine.
ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Scott Bauer, CEO of Prosper Trading Academy, thanks for being on the show.
SCOTT BAUER: Thank you.