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FxWirePro: Spotlight On Crude Oil Price Consolidation And Hedging Strategies

Global crude oil prices have regained buying sentiments of-late, with Brent crude futures seem to have been staged for 3rd consecutive week’s gains after last week’s rallies about 1.92% and WTI surged a bit (1.85%).

Today, Brent prices continued to rise by 0.60% to $63.05/bbl and WTI rose by 0.84% to $57.72 levels while articulating. Technically, WTI crude price consolidation looks stronger upon triple bottom formation with bottom 1 at $50.63, bottom 2 at $50.55 and bottom 3 at $51.03 levels.

While hammer candle at $52.27 level to propel upswings above DMAs with bullish crossover, and leading oscillators to substantiate. Both RSI and Stochastic curves show upward convergence to the prevailing price upswings to indicate the strength and intensified buying momentum.

Fundamentally, a report by OPEC also indicated that production outside of the cartel may decline in 2020, particularly within the US shale basins, which added further bullishness to the market yesterday.

Brent prices continue to be capped by the stiff resistance level of $63.28/bbl and it may probably require further breakthrough in US-China trade talks to move the oil market higher.

Hence, we come up with some trade updates on crude oil derivatives trades: We advocated crude oil derivatives trades on hedging grounds. 

Strategy reads this way: Shorts in CME WTI futures for October delivery for arresting downside risks in short-run, simultaneously, longs in CME WTI futures of December’2019 month deliveries. 

Contemplating above technical rationale we wish to maintain longs for now in CME WTI futures of December’2019 month deliveries. 

And also a risk reversal strategy by going long in Brent Dec’19 10D call versus short Dec’19 10D put. Thereby, we also stay tactically short Brent-Dubai Q3’19 swap spread due to mounting risks from Iran sanctions. 

By Niranjan Patil
  • Market Data
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