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Asset Watch
Thursday, November 21, 2024
Commodities have been negatively impacted on all sides since the Republicans won the 2024 presidential election, and the volatility could persist in the months ahead. Though deregulation and looser drilling policies should help the energy sector thrive under a Trump administration, encouraging more rigs to come online could increase supply and reduce oil prices.
But how should you trade WTI as we approach the end of 2024?
As Citigroup and Goldman Sachs attempt to model potential tariffs and trade wars, the former expects Brent to average $60 per barrel in 2025. Right now, Brent typically trades at a premium to WTI, which implies an even lower price for the U.S. benchmark.
Goldman Sachs expects Brent to average $76 a barrel in 2025. However, the team cautioned, “We still see the medium-term risks to our $70-85/bbl range as two-sided but skewed moderately to the downside on net as downside price risks from high spare capacity and potentially broader trade tariffs outweigh upside price.”
As a result, several unknowns have energy analysts lacking conviction.
Because fundamental risks have intensified, it may be wise to reduce your position sizes to avoid unwanted drawdowns. For example, every news headline that hits the wire in 2025 could impact the WTI price, as rumours cause the algorithms to act immediately and consider the realities later.
Consequently, large moves to the upside and downside may be the norm for the foreseeable future.
With conviction lacking in both directions, range-bound WTI still offers trading opportunities with solid risk-reward prospects. The horizontal white lines highlight how short-term support and resistance range from roughly $66 to $72.
So, if the next 30 days are anything like the last, crude should hold the range until more policy clarity emerges.
Buying near $66 and selling near $72 could be a prudent strategy over the next several weeks. You can even get more granular to find support and resistance levels that allow you to scalp over shorter timeframes.
Either way, managing the position may require more attention as sentiment in the oil market can shift rapidly as Trump fills out his Cabinet.
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