The crude oil market has always been my favorite asset class.
It helped me make my first million as a full-time trader.
And over a decade later, it’s still the #1 instrument I rely on for six-figure victories.
For some reason, I haven’t been writing as much about oil as I’d love to.
But as three major global events keep sending oil prices higher, I wanted to share a little insight that might help you leverage new opportunities on the horizon.
Let’s start with the Israel-Gaza war.
Most analysts didn’t think it would impact oil prices for long.
However, the ripple effects have done the opposite of what many expected.
For example, the recent spike in oil prices, fueled by Iran’s seizure of an oil tanker off Oman’s coast, has intensified the already volatile oil market.
Then, the Red Sea shipping lanes — crucial for global oil transportation — are under threat due to intensified Houthi attacks backed by Iran.
All of this creates supply shortages that send oil prices higher.
And there are unique opportunities if you look in the right places (more on that shortly), but understanding the dynamics that shape oil markets is paramount.
It’s not just the Israel-Gaza war; there are other global concerns, too.
- For example, unexpected shifts in U.S. inflation and China’s reduced demand for Saudi Arabia’s oil are influencing negative investor sentiment.
- An unexpected increase in U.S. crude, diesel, and gasoline inventories suggested a potential shift in the supply landscape. However, the new threat of a recession in Europe cast shadows on the outlook for demand.
- In other words, multiple global factors are at play here, not just one.
As these global factors keep playing out in the weeks and months ahead, the energy futures market will be a promising landscape for strategic trading.
However, unlike 2022/23, when you could’ve easily doubled your money trading obvious winners like Phillips 66, Occidental Petroleum, Valero Energy, etc…
The new window of oil opportunity calls for a more conservative approach.
One thing that’s always saved me from unnecessary losses is to trade fewer companies that rely on just oil production for revenue. And more vertically integrated names that produce, transport, and refine oil into usable products.
Why?
Because the more diversified an energy company is…
The lower your risks, and the higher the potential for hefty gains.
For more insight, see our big energy profits playbook here.
Wishing you many blessings,