Tanker traffic resumes and oil floods the market — fade the fear spike on crude
Thesis
A week ago, a tanker attack pushed oil prices higher on fears of a prolonged Middle East supply disruption. However, the latest news shows tanker traffic picking back up and a reopening Strait of Hormuz. This rapid normalization of shipping has instantly created an oversupply of crude, which is now flooding global markets. This combination of returning supply and a sudden glut suggests the recent fear-driven spike in oil prices is completely unwinding, creating a temporary oversold opportunity in energy.
Strategy approach
Build a mean-reversion strategy that enters long USO on D1 when WTI crude oil drops 5% over a 3-day window while the Brent-WTI spread widens aggressively (indicating a supply glut). Exit when USO recovers to its 20-day moving average or after a 14-day max hold. Set a 4% hard stop loss.