Monday, January 27, 2020

Solid crash course on global oil markets & trading

Of late, the global oil market has seen what can aptly be described as range-bound volatility. No matter what the bulls throw at it, movements of both Brent, the global proxy benchmark, and WTI, the main North American benchmark, have flattered to deceive when it comes to price spikes past $70 per barrel. 

Yet at same time, the price floor has largely held at $50 and barring a global slowdown, few are predicting a Q1 2016-esque slump below $30. Market variables are changing too, not least tweets from US President Donald Trump on oil prices and copious amounts of American light sweet crude flooding the market. 

In such a setting, should understanding the market, making calculated guesstimates on price direction and trading black gold tickle your fancy, be it via a position in the market or a spreadbet, then market commentator Simon Watkins' latest book – An Insider’s Guide To Trading The Global Oil Market – would be well worth your while. In a work of just under 360 pages, the author sums ups the runners and riders, speculators and chancers, players and detractors who have a profound impact on a sentiment driven commodity like crude oil. 

There's detailed analysis, fully illustrated charts linked to points made by the author and tips aplenty. The treatment of risk/reward management is great and Watkins has also taken the trouble of covering the history of the oil business in a concise fashion to give readers a sound understanding of key production centres, demand drivers and geopolitics. 

Recent developments in the China, Middle East, Russia and the US, and the cycle oil cartel OPEC finds itself trapped in, have been covered in some detail providing the essential padding to the outlined oil market history. 

Generic trading methodologies, strategies and cross-market opportunities deployed by proprietary traders around the world as outlined by Watkins make for an engaging narrative. Among the allied trades, the author's take on Saudi Aramco following its IPO, chimes with those in the short-sellers' camp, including this blogger, who note the various complications and lack of transparency associated with the so-called mother of all IPOs that promised so much internationally, but ended up a with mere single-digit percentage float on the domestic Saudi market. 

Overall, Watkins' impressive work cuts through market exaggerations designed to shift sentiment one way or another, and makes readers work towards developing their convictions while being cautious of manipulations, e.g. casual dropping of price rallies that lack legs, black swan events that are anything but, and risk premiums that barely last a trading week instead of having a tangible price supporting impact. 

Ultimately, as the author opines: "If the intricacies are understood, the oil market is a trader's nirvana; it offers far and away the most opportunities out of any other market for high returns." And to that effect, he's provided a very solid crash course that could serve both beginners and those with market exposure looking to brush up and refocus. 

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© Gaurav Sharma 2020. Photo: Front Cover - An Insider’s Guide To Trading The Global Oil Market  © ADVFN Books, 2019.

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For comments or for professional queries, please email: gaurav.sharma@oilholicssynonymous.com

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