I like the idea of buying dips and following the longer-term trade.
The West Texas Intermediate Crude Oil market has rallied quite drastically during the trading session on Thursday as Vladimir Putin sent troops into Ukraine, kicking off a major “risk off” type of situation, and of course a lot of fear that the oil markets may struggle to continue providing the world it is necessary supply. Whether or not that’s actually the case is a completely different question altogether, but at this point it looks like the market found the $100 level a bit too much.
Ultimately, this market was always going to try to find its way towards the $100 level, so am not overly surprised that we ended up testing it. We have turned around as it looks like the destruction is somewhat limited so far, and that does in theory help the idea of crude oil still flowing around the world. Furthermore, we have not seen a significant move to truly punish the Russians quite yet, so therefore I think a lot of traders are assuming that even though crude oil is bullish, when you get something like an $8.00 move, you might want to take profit.
At this point, it certainly looks as if the market may try to pull back a bit, but quite frankly I think there are plenty of areas underneath that should continue to offer reasonable support. Because of this, I like the idea of buying dips and following the longer-term trade. In fact, I believe this market is probably supported all the way down to at least the $90 level, so in this environment you are more or less going to be looking for an opportunity to pick up a little bit of value and then play the market accordingly.
If we did break down below the $90 level, then we may have a deeper correction, but to think that the bullish run for crude oil is over, that would be a bit of wishful thinking in my estimation. Because of this, I think it is only a matter of time before we see value hunters come back into this market and therefore, I think nothing has changed other than the fact that we had a little bit of a catalyst to push things forward in the short term. Longer-term, we were always going to get to the $100 level anyway.
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