After being forced to buy every 50-cent incremental dip to stay afloat yesterday and barely break even, today could be a pillow on a desk day for most market participants. Nonetheless, there is no rest for this weary when you trade a 10X standard vol asset.

Outside of this week’s realization that much more oil is available on the market than most had assumed, the economic supply and demand variable ultimately upended the China rally cart.

For one, I am unsure where oil will trade next week(I’m guessing higher)  as we are now in momentum-chasing mode, layering options on either side of critical technical points where we think CTA’s are lurking. It is not the cheapest strategy, but it is prudent in this market.

Traders entered the year believing that inflation was yesterday’s problem, but growth is still the main worry for 2023. While we expect all significant economic engines to avoid recession this year (except for the UK), so higher oil prices in tow, it is essential not to be complacent about the risk of a US recession, given the significant impact on oil prices it would likely entail.

With few easy portfolio hedges for oil, you are either out or in. Trading in an oversupply -mode where any weaker US economic data could trigger a $2.00 + sell-off; hence oil prices are perilously perched, especially if we get a payrolls clunker. So on any recessionary vibes via weaker US economic data, the oil markets will likely take another beating.


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In addition to supply concerns, LNY hangover perhaps drove yesterday’s plunder as mobility green shoots failed to translate into a pick up in oil imports to China.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT