Disruption to the oil supply chain averted (at least for now)

27 dic 2023

Following the initiation of Operation Prosperity Guardian in the Red Sea, major shipping companies like Maersk and Hapag-Lloyd began to reverse their recent decisions to halt transit through this waterway. That is positive news for the world as the region is estimated to account for about 12% of global trade, with 340 million metric tons of cargo and 8.2 million barrels of oil passing through daily. Nonetheless, as disruption to the oil supply chain seems to be averted, this news is likely less favorable for the oil price, which is currently trading near $75.50 per barrel. With that said, we have no reason to change our outlook for the next year, and our price target stays at $65 per barrel; however, in the short term, we acknowledge that USOIL may move higher (potentially somewhere in the range between $77 and $78) before reversing. We will update our thoughts with the emergence of new developments.

Illustration 1.01

Illustration 1.01 shows the daily chart of USOIL. The yellow arrow indicates a bullish breakout above the upper bound of the downward-sloping channel, which is quite bullish (unless invalidated).

Technical analysis
Daily time frame = Slightly bullish
Weekly time frame = Bearish (turning neutral)

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.

27 dic 2023

Nota

As a result of today's meeting, Hapag-Lloyd decided that it is still too risky to resume shipping through the Red Sea; Maersk's resumption plans stay unaffected, though.

28 dic 2023

Nota

Bullish breakout became invalidated.