Trade Projections for Brent & WTI: A Sharp Drop Avoided!

Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Trading positions

Henry Hub Natural Gas No new position justified on a risk/reward point of view.
RBOB Gasoline No new position justified on a risk/reward point of view.
WTI Crude Oil Long $107.67-110.06 (yellow band) with stop just below $103.24 (red dotted line) and targets at $116.43, 119.98 & 123.68 (green dotted lines).

Update: Entry triggered / Stop lifted just below Jun-17’s low @ $108.25 to reduce risk / stopped triggered slightly below entry (small loss)

Brent Crude Oil $110.47-112.27 (yellow band) with stop just below $106.20 (red dotted line) and targets at $118.43, 120.80 & 124.42 (green dotted lines).

Update: Entry triggered / Stop lifted just below Jun-20’s low at $111.52 / stopped triggered slightly below entry (small loss).

Regarding risk management, it is always best to define your strategy according to your own risk profile. For some guidance on trade management, read one of my articles on that topic.

Yesterday, I decided to tighten my stop (below recent day lows) for both crude oil benchmarks in the face of the fears over the recession and a global economic slowdown (which would imply a critical drop in global oil demand). Given that our entry (yellow band) was executed on solid (long-term) support, the latter being broken would be a good signal for a market pivoting into bearish territory – which is exactly what happened! There are indeed some catalysts pulling oil prices down. US President Joe Biden will ask Congress today to suspend the federal tax on automobile fuel for three months to limit the surge in prices at the pump, according to a source within his administration.

Therefore, oil prices fell almost 5% during the European session, swept away by fears of recession combined with President Biden's desire to intervene to stem the escalation in fuel costs triggered by inflation, which made investors react violently. So, this trade lost fuel (momentum) but at least it was exited early (near break even) as per my risk guidelines. This is a great example of why, in those volatile markets, when we get too close to some “ground floor-like” support – that is to say, the last support level which, if broken, would constitute a pivot for a market eventually switching towards a more bearish tone – it is always better to keep some tight stops!

PS: Don’t forget to switch into the new front month (August 2022) future contract on WTI crude oil (CLQ2022) as per below capture: