Current Crude Situation

Crude Oil Today

On 20th April 2020, prices for Crude Oil’s USA benchmark (WTI Crude) went into negative territory for the first time in history.

For those not familiar with the working of the Crude markets, this was a historical situation and one that created misgivings about this market.

But nothing could be further from the truth, as this aberration occurred because of the structure & working of the futures markets.

There are two aspects of the Crude futures markets, like any other commodity futures.

One is the calculation of prices for futures contracts, which is determined by ‘demand & supply’, both present & future. For example, this current situation of oil prices going negative was specific to the futures contract of May 2020, which was expiring on 21st April.

But the other futures contracts for future months had different rates, and one could just as easily trade those.

The second aspect is the continuous trading available for any commodity and in different ways – futures, options, CFDs, etc. It’s the structure of these markets that can give trading opportunities, even in times of such ‘Black swan’ events. Hence it is a misgiving to assume that one should now stay away from trading the Crude markets.

The Crude Oil market is still one of the most volatile commodities, simply because of the physical demand & supply…which as of today, is an essential requirement for every economy.

We at Bretcrown are more concerned about the trading opportunities, as we firmly believe that these fundamental factors only create more opportunities. First, there are different Crude markets available to trade – The WTI Crude, Brent Crude, Natural Gas, etc. While the fundamental factors would affect all the markets, each & every market has its unique characteristics, which can be identified by experienced traders. For example, we primarily trade the Brent Crude, which did not go into negative territory on this day since the issue was very specific to the WTI May contract.

Which brings us to the second & the most important factor of The Crude Oil Investment Club. We believe that Technical Analysis is nothing more than a reflection of the ‘Buy’ or ‘Sell’ decisions that are taken by traders.

These decisions could be centered on the demand/supply of the commodity or could be built on some mathematical formulae or anything else for that matter. What is important is that the charts give us trading opportunities and enable us to participate in the markets, in any direction.

Most of our trades are short term trades, which are classified as scalping. We rely on a combination of unique factors to decide our trades – both fundamental as well as technical.

These trades could last from a couple of minutes to maybe a couple of hours, and we strictly keep a watch on the ongoing trades, managing for profit or loss. We ensure that no trades are kept open at the close of the trading day, as we do not want any fundamental factors affecting the trades when we cannot monitor them.

As a prime example, enclosed is a short-term trade taken on Brent Crude on the same day of 20th April. And if you will observe, this was a ‘Buy’ trade, opened at a time when the WTI Crude was moving towards the negative values.

As can be seen, our system identified the trade; we entered a ‘Buy’ with a specific Stop Loss & a specific Target. As soon as the price reached the expected target, we closed the trade for a profit and were out of the market….looking for another opportunity.

Because of the very nature of the Crude market & the volatility, we tend to get a large number of such opportunities in the trading day, every week. We look for trading opportunities, irrespective of where the price of the commodity is going. The more volatility in the markets, the more opportunities there are for us.

And this is precisely the reason why this is the best time to get involved and join The Crude Oil Investment Club.

Sunil Mangwani

Director and Chief Technical Analyst