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Maintaining A Long Bias On Oil

Oil Rig

The timing of these pieces, coming at the end of the week, is sometimes a frustration, but often a blessing. There are times when I want to give you a “hot take” on something in the news. After all, as somebody who made a living in a dealing room for a couple of decades, reacting is kind of what I do. However, my inability to react immediately to this week’s big news, Trump’s decision on the Iran deal, was probably a good thing.

On the surface, the market implications of the decision were obvious. Even those who believe that the original deal was a bad one would struggle to argue that unilaterally withdrawing from it left the Middle East more stable than it was before, and instability in the region always pushes oil prices up. Because of the potential significance of the announcement in that regard, my own hot take was that oil was about to fly. WTI did indeed jump, but as you can see from the chart below, on the initial reaction, futures only made back the ground lost earlier in the morning, when a rumor surfaced that Trump would stay in the deal. I did manage to get long shortly after the announcement and made money on the trade, but it was a long way from the home run I envisaged.

(Click to enlarge)

After that muted initial reaction we have continued a little higher, but still not nearly as much as many people expected. What I and many others forgot in our enthusiastic bullishness when the news came on Tuesday was something…

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