Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Long positions with entry at $63-63.5, with $59.7 as a stop-loss and $68.20 as the initial price target.
Oil prices have been on a rise since the last 2 trading sessions, as good manufacturing numbers are coming out of the US and Europe. Will this trend continue this week?
Last week, the Iran-US deal dominated the narrative of the oil market. For three straight sessions, WTI price was in a free-fall because sentiments on oil oversupply were driving trading decisions. However, by last Friday that sentiment subsided – the market could not ignore the steady and marvelous progress of the US in opening the economy.
Since then, the market has been surging; it is already at $65 levels – around 2.23% higher than when it closed last time. The key reason is not new – vaccinations in the US and Europe are steadily enabling normal operations, which result in higher usage of transportation and higher manufacturing output. For example, the Flash Markit US Composite PMI Index was released recently, and it stood at the value of 68.1 – an increase of 7.2% since the last month’s reading of 63.5.
India’s Covid-19 daily new cases are coming down as fast as they have been rising in the past few weeks. At the current rate, the situation will be near-normal in India by the end of June 2021. Similarly, the reduction of daily new cases in Japan also seems to be on a sustainable road after the country put several provinces under emergency restrictions. If the sudden surge of demand from these countries joins the steady rise from the US and Europe in the next 2 months, oil supply will not be sufficient to meet this demand. No wonder that Goldman Sachs has reiterated its stance that Brent oil is highly likely to hit $80/barrel despite the addition of Iranian Oil.
In short, oil was on a rise to course-correct the price fall of the last week caused by the sentiments on Iranian oil addition in global supply. As I estimated last week, this was a short-term overcorrection, and it was a great time to buy at lower levels – now that ship has sailed. However, we can expect a further price rise in the coming weeks, and therefore, I won’t exit my position.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Long positions with entry at $63-63.5, with $59.7 as a stop-loss and $68.20 as the initial price target.
Thank you.
Nishant Jain, MBA, CPSM
Oil Trading Strategist
