Mideast stocks are in turmoil now that sanctions have been lifted off Iran. However, this brings an entirely new dynamic into play: up to 500,000 barrels of oil per day could be dumped onto the markets. Now oil prices are trading below $30 per barrel, at $29.42 for WTI crude oil and Brent crude trading at $28.94 per barrel. U.S. oil (WTI crude) came under intense pressure and plunged 5.7% as Chinese equities hit the skids. For the year to date, the global benchmark for oil dropped more than 20%. But the worst is yet to come as Iran is preparing to reenter the oil market and it is at loggerheads with Saudi Arabia – a fellow OPEC giant. After the IAEA met over the weekend, it was announced that Iran had satisfied all requirements of the international community and that sanctions would be lifted with immediate effect. Iran had over $100 billion of assets unfrozen after complying with demands. The reentry of Iran has sparked additional concerns of an exacerbated supply glut depressing prices further. But there are even more serious concerns about the declines on the Shanghai Composite Index which has closed at its lowest level in over 1 year (shedding 3.5% on Friday). Pressures on the US economy remain, with industrial production and retail sales at low levels. This presents an interesting set of challenges and opportunities for the upcoming trading week.
1 – Commodities: Consider Put Options on Crude Oil
The pressures continue to mount for crude oil, and both WTI crude and Brent crude have broken through the critical $30 support level. Analysts are expecting prices to drop further this week given that sanctions have been lifted off Iran and China weakness is deeper than previously thought. Brent crude oil futures for March delivery are now priced at $28.96 per barrel and WTI crude oil futures are priced at $29.42 per barrel. There was a sliver of good news for shale oil producers in the US as Baker Hughes reported that the rig count had only fallen by 1, to 515 rigs in operation. Nonetheless, this figure is substantially lower than the 1,366 oil rigs operating in the United States barely 1 year ago. As a binary options trader, your best bet is to place put options on oil this week.
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