Strait of Hormuz threat rattles oil markets. Time to sell?
A couple of 鈥淔ast Money鈥� pros largely brushed aside concerns about Iran鈥檚 effect on聽crude oil prices聽Tuesday, focusing instead on decreasing demand as the stronger factor in the commodities market.
聽鈥淚t鈥檚 saber-rattling again,鈥澛�MercBloc President Dan Dicker听蝉补颈诲.
聽Crude oil prices briefly spiked $3 Tuesday on news that聽.
Thirty percent of global seaborne crude shipments and 17 percent of oil traded worldwide passes through the waterway.
聽鈥淭here鈥檚 been a lot of activity in the way-out-of-the-money calls, both on the upside and on the downside, which makes it very strange,鈥� he said. 鈥淓very fundamental says you should short oil. You don鈥檛 want to be long oil, but it鈥檚 practically impossible to be short here.鈥�
聽Call options in the $130 to $155 range were 25 percent to 93,000 contracts, while $45 to $60 put options were 33 percent to 60,000 contracts, according to Dicker.聽Brent futures聽were up $1.68 a barrel to $108.94 shortly before 1 p.m. ET, and聽U.S. light, sweet crude聽rose $2.17 a barrel to $99.94.
聽鈥淚t is very much in Iran鈥檚 interest to rattle the cage,鈥� trader Steve Cortes said. 鈥淚t is not in their interest to actually start a fight with the United States.鈥�
聽Cortes said he used the day鈥檚 rally to sell.
聽鈥淥il has so vastly outperformed other commodities 鈥� say, for instance, aluminum, which has traded dreadfully 鈥� that the oil bid is not about real demand,鈥� he said. 鈥淚t鈥檚 purely about Iran fear, and you should fade that fear.鈥�
Cortes also looked to China, noting that the Shanghai Composite was down 20 percent for the year.
鈥淭hat is terrible news for crude,鈥� he said. 鈥淐rude is only being held up by Iran, and maybe that鈥檚 enough if there鈥檚 going to be an actual conflagration in the Strait of Hormuz.
鈥淚鈥檓 going to bet that there won鈥檛 be, and I used today鈥檚 crude rally to fade it. One of the main reasons is weakness in China.鈥�
Trader Brian Kelly also said China was a big concern.
鈥淚f you just run a simple correlation of China GDP versus oil, they are positively correlated, which they鈥檙e negatively correlated if you do the U.S.,鈥� he said. 鈥淪o, if you have a falling China, you have falling oil prices.鈥�
