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I’ve been watching crude oil act like a caffeinated squirrel for the past few days, and I think I finally figured out what’s going on.
The real problem? Nobody can answer the simplest question in the world: Who controls the Strait of Hormuz right now?
I’m serious. One minute you hear the U.S. has it secured and we’re escorting ships through there. The next minute you hear that’s not happening. Then you hear it’s happening again, then it’s not.
Meanwhile, Iran is bombing ships and not letting anybody through, basically closing things down. Then suddenly news flips again and we’re escorting ships.
Crude jumps to $100, then dumps to $93, then jumps again. Nobody can keep a straight story, and crude is trading like it’s confused out of its mind.
How Crude Oil Traders Are Getting Whipsawed
Here’s what I saw on a 30-minute chart of crude oil: Buyers were all over it, pushing crude above $100, and then — boom — sellers dumped it right back down to $93.
Friday had a big rally where they pushed crude higher, and then the news flipped again. Suddenly, reports came out that we’ve got control of the strait, so crude gets hammered again.
This isn’t normal volatility. This is straight-up confusion. When ships are getting hit, traffic is suddenly blocked, then it’s open again with escorts, the market reacts like it’s got whiplash.
If you’re trying to trade the contracts themselves right now, you might as well flip a coin. You’re going to be right one time and wrong the next.
Just let everybody else whip this thing around. It’ll end up being fine and dandy, but trying to chase it is a losing game.
The Real Problem Nobody’s Talking About
Look, I get why crude is so sensitive to this. 60% of the oil California relies on comes through the Strait of Hormuz.
20 or 25 years ago, they produced 40% of the oil in the United States. Now they’re importing 60% of their oil. That’s how dramatically production has been restricted out there.
So you can see why tensions in the strait hit the market like a sledgehammer. It isn’t just some distant shipping lane. It’s a major artery for U.S. supply, especially for the West Coast.
And here’s another piece that tells you everything you need to know: When Trump is asking Dubai and Saudi Arabia for help keeping traffic moving through the Strait of Hormuz, it’s pretty clear nobody has solid control of the situation.
Until the geopolitical side sorts itself out — and I mean really sorts itself out, with one consistent answer about who’s actually controlling the strait — crude is going to keep bouncing between reports of Iran blocking ships and reports of safe escorts.
My advice? Just be patient. Don’t try to trade every headline. This thing will play out, but you don’t need to be a hero while it does.
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Geof Smith
Geof Smith Trading
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Disclaimer: We develop strategies to the best of our ability, but we cannot guarantee a future return. There is always a risk of loss when trading. Past performance is not indicative of future results. Since 12/05/2024, the trading approach discussed today has published 54 trade alerts. All 54 have returned as winning trades, for a 100% win rate. The average return per trade, winners and losers combined, has been 16.88% on an average holding period of 9 days.
