Oil's war premium meets a global glut — short the bounce
Thesis
Iran's aggressive posturing around the Strait of Hormuz created a fear premium in oil prices, but the very next day Bloomberg reported a 'growing oil glut' with Asian refiners dumping excess cargoes on the US market. This supply-demand imbalance — too much oil chasing too few buyers — makes the geopolitical price spike unsustainable. Layered on top, Citadel Securities warns that Fed Chair Kevin Warsh is determined to crush inflation, which historically involves crushing energy prices. This combination of a physical supply glut and a hawkish central bank points to lower oil prices.
Strategy approach
Build a rule-based strategy that enters short USO on D1 when WTI crude oil makes a 10-day high but then closes below its 5-day low within 3 sessions, with a 21-day max hold and a 6% stop loss.