Oil crashes on supply glut while Iran threatens shipping — contrarian bounce pla
Thesis
Oil is headed for its largest quarterly price drop since 2020 as a massive glut develops, with Asian refiners even shipping excess crude to the US because they have too much. However, Iran is ratcheting up talk of controlling the Strait of Hormuz just as these new talks approach. If Iran acts on these threats and disrupts the shipping lanes that are currently flooded with oil, the glut would evaporate instantly and prices would reverse violently upward. This creates an asymmetric setup where traders can buy oil at massive discounts while a clear geopolitical catalyst simmers.
Strategy approach
Build a rule-based strategy that enters long UCO on D1 when WTI crude oil futures drop more than 2% in a single day AND there is a major breaking news event regarding Iran threatening the Strait of Hormuz. Exit the position if oil prices resume their downtrend and make a new 20-day low, or hold for a maximum of 14 days to capture the geopolitical risk premium.