Oil dropping below $90 on peace hopes — bet on cheaper energy as tensions ease
Thesis
Geopolitical tensions in the Middle East have kept a 'fear premium' baked into the price of oil for months. Now, Kuwait is breaking ranks to offer oil to Asia, and the US and Iran are signaling that peace talks are on track, which is pushing oil prices down to multi-month lows. As the threat of supply disruptions fades, this premium is rapidly deflating. This creates an opportunity to bet on continued downward momentum as the market adjusts to a calmer global supply picture.
Strategy approach
Build a short-term mean-reversion strategy for the US Oil Fund (USO) on the 4-hour (H4) timeframe. Enter a short position when USO registers a sharp breakdown, specifically when the RSI(14) drops below 35, but exit quickly with a 3% profit target. Place a strict 5% stop loss to protect against a sudden geopolitical reversal.