Light Sweet Crude Oil
The light sweet crude oil market has been as high as just under the $120 level and as low as the $77 level during the month of March. In other words, it’s been all over the place and the only thing that I can see on the chart that is somewhat consistent is that anytime the market falls, buyers come in to pick it up.
We have seen massive $20 drops out of the blue as a tweet crosses the headlines or some type of potential peace movement happens, and then we will see it turn around and traders start to jump in and buy this market.
Geopolitical Influence and Market Clarity
Keep in mind that a lot of things are being driven by the latest headline right now, so the one thing that I can tell you about the month of April is that it is probably going to be very difficult to get a handle on.
Position sizing must be very small during the month of April, at least until we get some type of clarity, and that clarity would of course be a peace treaty in the Middle East. While the light sweet crude oil market is not a Middle Eastern contract, what happens is that the Europeans and other places around the world may drive the price of light sweet crude oil higher as they start buying US exports.
Ultimately, this is a market that is just simply going to move on the latest headline and therefore it’s almost impossible to predict without having some type of grasp on geopolitics. As things stand right now, the Iranians want higher oil prices because it could make the Americans stop.
On the other hand, the United States is completely energy independent at this point as the heavier crude can either come from Alberta or now Venezuela, so you have a clash of cultures here that could cause chaos for the rest of the world and just make gas a little bit more expensive in the US.
So, while the Iranians do have a powerful card to play in the closing of the Strait of Hormuz, the reality is that it doesn’t hurt the United States like it does other parts of the world. So, trading oil is almost impossible to do with any type of clarity, and I don’t think until we get a peace agreement in the Middle East that crude oil will trade like a steady asset.
I think the only thing you can take away is that anytime it gets crushed, all it takes is a headline to turn things right back around and have the buyers jump into the market. I suspect we are somewhat range-bound heading into the month, and we may stay that way unless the war ends.