Is It Time to Follow the Oracle's Lead?
You may have heard of a certain Warren Buffett, and it seems like he might be onto something...
Buffett, known as the "Oracle of Omaha," has demonstrated remarkable investment timing, or perhaps an innate ability to steer investment flows. This was clearly illustrated by his investment in Japan, which triggered a rally in the Nikkei to decade-long highs. While that window may have closed, Buffett has been discreetly bolstering his stake in another entity - Occidental Petroleum (OXY).
If we scrutinize the timing of his purchases, it's apparent that Buffett likely had a price floor in mind. Intriguingly, his first purchase occurred when Crude was trading at a 15-year high!
This leads us to examine Oil, which has been trading nearly 40% lower since mid-2022.
Since our last discussion about oil, the Strategic Petroleum Reserve (SPR) has been further depleted, reaching its lowest level since 1983. The result of this drawdown is a diminished impact on energy costs as evidenced by the energy inflation index, which has not only passed its peak but has now turned negative.
Interestingly, the Canadian dollar and the Norwegian Krone, currencies of major oil-exporting countries, have been outpacing the commodity typically correlated with them, Crude Oil.
On the whole, it seems the energy commodity sector may have bottomed out, with all types of Oil and natural gas trading on an upward trajectory.
In consideration of these factors, the outlook for oil leans towards the bullish side. The scarcity of oil in the SPR and the absence of energy inflation as a significant contributor to overall CPI make it unlikely for the U.S. to release more oil to depress energy prices. Coupled with the buoyant trend in the energy commodity space and the recent outperformance of major oil-exporting countries' currencies, it appears to be an opportune moment to consider a long position on oil. At the current price level of 72.33, risk managed trade points to setting the stops at the previous support of 66 and take profit level at 85. Each Crude Oil Future contract is equal to 1000 barrels of crude oil. Each 0.01 point increment in Crude Oil Futures is equal to 10 USD . The same view can also be expressed with greater precision using the Micro WTI Crude Oil, where each Micro contract is equal to 100 barrels of crude oil and each 0.01 point increment is equal to 1 USD.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
cmegroup.com/markets/energy/crude-oil/light-sweet-crude.contractSpecs.html
cmegroup.com/markets/energy/crude-oil/micro-wti-crude-oil.contractSpecs.html
eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
tradingeconomics.com/united-states/energy-inflation
Buffett, known as the "Oracle of Omaha," has demonstrated remarkable investment timing, or perhaps an innate ability to steer investment flows. This was clearly illustrated by his investment in Japan, which triggered a rally in the Nikkei to decade-long highs. While that window may have closed, Buffett has been discreetly bolstering his stake in another entity - Occidental Petroleum (OXY).
If we scrutinize the timing of his purchases, it's apparent that Buffett likely had a price floor in mind. Intriguingly, his first purchase occurred when Crude was trading at a 15-year high!
This leads us to examine Oil, which has been trading nearly 40% lower since mid-2022.
Since our last discussion about oil, the Strategic Petroleum Reserve (SPR) has been further depleted, reaching its lowest level since 1983. The result of this drawdown is a diminished impact on energy costs as evidenced by the energy inflation index, which has not only passed its peak but has now turned negative.
Interestingly, the Canadian dollar and the Norwegian Krone, currencies of major oil-exporting countries, have been outpacing the commodity typically correlated with them, Crude Oil.
On the whole, it seems the energy commodity sector may have bottomed out, with all types of Oil and natural gas trading on an upward trajectory.
In consideration of these factors, the outlook for oil leans towards the bullish side. The scarcity of oil in the SPR and the absence of energy inflation as a significant contributor to overall CPI make it unlikely for the U.S. to release more oil to depress energy prices. Coupled with the buoyant trend in the energy commodity space and the recent outperformance of major oil-exporting countries' currencies, it appears to be an opportune moment to consider a long position on oil. At the current price level of 72.33, risk managed trade points to setting the stops at the previous support of 66 and take profit level at 85. Each Crude Oil Future contract is equal to 1000 barrels of crude oil. Each 0.01 point increment in Crude Oil Futures is equal to 10 USD . The same view can also be expressed with greater precision using the Micro WTI Crude Oil, where each Micro contract is equal to 100 barrels of crude oil and each 0.01 point increment is equal to 1 USD.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
cmegroup.com/markets/energy/crude-oil/light-sweet-crude.contractSpecs.html
cmegroup.com/markets/energy/crude-oil/micro-wti-crude-oil.contractSpecs.html
eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
tradingeconomics.com/united-states/energy-inflation
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