Less than two weeks ago, strikes on Saudi oil fields took out 5% of the world’s total production in the biggest single supply shock ever, causing oil prices to spike nearly 20%.
Today, oil prices officially erased the entirety of that surge.
It’s trite to say that markets are moving faster than ever, but this month’s price action in oil serves as an undeniable reminder of that fact. With Saudi production nearly fully recovered and news that the country has agreed to a partial ceasefire with Yemen’s Houthi rebels, the market is already looking ahead to the next hotspot that could influence oil’s global supply.
Now, traders are turning their attention to Iran. According to one headline, the Iranian President stated that the US had offered to remove all sanctions on the country in exchange for talks over Iran’s nuclear capabilities. Oil prices initially dropped on this apparent sign of progress in the region, but the news is now in dispute after some Iranian reporters suggested that the headline was mistranslated. In any event, the Trump Administration doesn’t appear keen to meet with Iran at present, so crude will continue to trade with a geopolitical risk premium in the near term.
Technically speaking, WTI is trading almost precisely in the middle of its 5-month range between 51.00 and 63.25. With both the RSI and MACD indicators showing neutral readings, it’s difficult for traders to have a strong bearish or bullish bias in the short term:
Source: TradingView, City Index
Moving forward, oil traders may want to focus on using rangebound strategies (buying dips toward $50 or selling rallies toward $60) until a major development changes the global supply and demand dynamics for crude.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.