Trading position: Our long position for the short term holds as supply demand deficit and disruption risks will remain for next few months. (short-term; my opinion; levels for crude oil’s continuous futures contract): Hold long positions with entry at $59-61 with $51.50 as a stop-loss and $68.10 as the initial price target. There is a decreased probability of big dips for the next few weeks, hence keeping the stop-loss much farther behind is justified.

In a positive development, efforts to free the container ship Ever Given were successful and the Suez Canal is unblocked, so the traffic jam of ships has now started moving. It is expected to take about ten days for the backlog of waiting ships to be normalised.

There were previous expectations that the blockage may continue for weeks, which definitely would have had a major impact on overall freight charges. Now, with this early resolution, the overall impact has been reduced significantly. The market has responded with an approximate 1.5% fall in oil prices, however, it’s still at a solid base of $60 per barrel.

I think the impact of this unexpected event has played out. The key forces of demand volatility and key consumers diversifying their oil sources, coupled with a stronger dollar, are going to determine the future movement in prices. It will be interesting to note the response of OPEC to the developments in India and China seeking out alternative oil sources. 

As always, we’ll keep you, our subscribers well informed.

Trading position: Our long position for the short term holds as supply demand deficit and disruption risks will remain for next few months. (short-term; my opinion; levels for crude oil’s continuous futures contract): Hold long positions with entry at $59-61 with $51.50 as a stop-loss and $68.10 as the initial price target. There is a decreased probability of big dips for the next few weeks, hence keeping the stop-loss much farther behind is justified.

Thank you.

Nishant Jain, MBA, CPSM
Oil Trading Strategist