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FxWirePro: Brent Staged For 2nd Week’s Gains – Crude Oil Derivatives Trades

Global crude oil prices have regained buying sentiments of-late, with Brent crude futures staged for 2nd consecutive week’s gains about 2.42% and WTI lost a bit (-0.2%).

Brent prices continued to rise by 0.67% to $62.98/bbl today on news that American crude stockpiles declined yesterday by 541k barrels.

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.

Technically, hammer candle has occurred at 57.64 levels on Brent oil price chart (refer daily plotting), consequently, the bullish pattern has taken-off rallies above DMAs, while both leading & lagging indicators bullish bias, more rallies likely upon breakout above stiff resistance of 63.28 levels.

Hence, we come up with some trade updates on crude oil derivatives trades on both trading and hedging grounds: We advocated crude oil derivatives trades on hedging grounds in our recent posts. 

The 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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