Crude Beginnings: Reasoning behind my First (Dummy) Trading Position on the Oil Markets


* (Market consensus):


- Global crude supply and inventory building outpacing demand growth


- WTI is US primary benchmark and US refineries are not reliant on Brent Crude at the moment - Trump tariffs will have great exposure on any cross-border oil flows anyways.


- US-Russia energy ceasefire has eased supply disruptions and reduced the risk of price spikes - which THE MARKET believes will be in the immediate / mid-term interest particularly of Russia until it has regathered itself economically if it wants to continue the war (Putin political suicide if not, supposedly).


- Lack of new licenses in the North sea should not influence Brent price in immediate future, as current projects are transitioning and won’t immediately remove large volumes from the market. Also non-OPEC producers (notably brazil and guyana) are expected to increase production, helping balance the market. 


- Seasonality aligns: spring-early summer, refinery maintenance, less need for heating, less driving/flying out of holiday season.



(My Consensus):


Going long on Brent crude despite the above*. As I believe the lowering prices are based on the assumption of temporary peace between Russia and Ukraine, which I believe is likely wrong. I also think this new price low has a resistance (from going much lower) in turn from OPEC cutting production in response to overproduction (therefore controlling price) and also Trump tariffs on business (mainly Chinese) using Iranian oil should raise interest in Brent crude, or at least on a speculator level in the market.



Will shorting US crude make sense considering their economic growth outlook and acting as a hedge to a long Brent future? Their supply is reaching record highs and does demand (also considering seasonality) really merit any real upward movement? 


Global demand would be insufficient to absorb their high supply levels 


No strong chance of upside unless there’s an unexpected disruption in supply 



Note: both long and short futures of Brent and US crude (WTI) will be for an expiration date in May/June (two or three month time-frame).


Specific details of my trade/s to come in the next post...

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