Two market signals to watch for during periods of oil volatility.
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Most investors see oil headlines and react to them emotionally.
Jonathan Rose sees the signs.
On Friday digest In Takeover, the veteran trader highlights two market indicators he watches during periods of energy stress — and explains why he believes they may actually be demonstrating another big opportunity in oil and refinery stocks.
In fact, he says the same signals helped determine one of his best refining trades earlier this year — a trade that delivered an 80% return in just one week.
Below, Jonathan explains exactly what these indicators are, how they work… why the current geopolitical backdrop may create another similar setup… and what it could mean for energy investors from here.
He will also delve deeper into this strategy during his freedom Peak convergence With Wall Street veteran Mark Chaikin on May 28 at 8 p.m. ET. You can reserve your seat here.
If volatility becomes the new normal in energy markets, understanding these signals could be incredibly profitable in the coming months.
I’ll let Jonathan take it from here.
I wish you a good evening,
Jeff Remsburg
In October 1973, the world realized how fragile the global oil system was.
A coalition of Arab countries attacked Israel on Yom Kippur. The United States responded by sending aid. Within days, OPEC issued an oil embargo on the United States.
The result was immediate and brutal. The price of oil rose from $2.90 per barrel to $11.65 in three months. At gas stations, Americans watched prices jump 36% overnight. Drivers sat in gasoline lines for hours, and some stations ran out before noon. Rationing began.
Credit: Judy Lin
Americans watched gasoline prices rise almost overnight, while Washington imposed a national speed limit of 55 miles per hour and urged citizens to conserve fuel as a patriotic duty.
The shock eventually subsided. But before the decade was out, the Iranian Revolution caused a second supply outage, sending prices soaring. By 1981, the price of oil reached $35 a barrel, nearly 12 times its cost before the OPEC embargo.
What these two crises revealed was not just the extent of the world’s dependence on oil. They also reveal how quickly the entire system can collapse when the geopolitical system shifts beneath it.
Fifty years later, it began to change again.
And this time, the cracks are deeper.
In this article, I want to offer you something more useful than prediction.
I want to show you exactly how I read an oil market under pressure – the two specific signals I’m watching, how they work together, and how they actually gave us one of our best trades of the year.
If you understand these signals, you’ll never look at an oil headline the same way again. And you’ll know what to do with your money — and make a profit — before Wall Street finds out.
This may be older than 1973
Earlier this year, the United States entered into a conflict with Iran, which led to the closure of the Strait of Hormuz – the narrow waterway through which nearly 20% of the world’s oil supply passes every day.
When he’s under pressure, we all feel it.
The oil responded immediately. The price of West Texas Intermediate crude ranged from $66 per barrel to more than $100. Brent crude – the global benchmark – rose from $71 to $119. In three months, crude oil prices have nearly doubled.
But the bigger story wasn’t the price action. This is what happened within OPEC.
After nearly 60 years, the UAE announced its withdrawal from the cartel.
This is it no Slight development.
The United Arab Emirates is one of the five largest oil producing countries in the world. Its exit is not a diplomatic footnote — it is a break in the structure that has governed global oil supplies since 1960.
The timing made it worse. The announcement came just before a scheduled OPEC meeting, amid an active regional conflict, with the Strait of Hormuz already under pressure.
In 1973, the crisis came from outside OPEC – Arab countries using oil as a weapon against the West. What we are seeing now is the disintegration of this alliance. This instability may end up being deeper and more difficult to reverse than it was in 1973.
The question is not whether energy market volatility will remain high. It will.
The question is how to put yourself in a position to benefit from the volatility that has become a long-term feature of energy markets.
This starts with understanding two signals.
The two signals I watch when oil is volatile
I’ve been trading energy markets for nearly 30 years – from futures in Chicago to the options floor of the Chicago Options Exchange. During all that time, I’ve found that the most reliable way to profit from oil price fluctuations is not to predict which way prices will go. It’s reading what the market is actually telling you.
Two signals do most of this work. These are not predictions. They are tools that help professionals earn.
The first is crack propagation. This is basically the profit margin for oil refineries. Think of it like owning a bakery. Your input cost is flour, that is crude oil. Your output is bread, i.e. gasoline and diesel. The spread is the difference between what you paid for the ingredients and what you sold the finished product for. This difference is your profit margin.
When the crack spread widens — meaning refiners make more money per barrel they process — refinery stocks tend to follow. When he presses, they struggle.
Currently, the spread of crack is expanding. Refining companies have been buying crude for weeks at lower prices. They are selling gasoline and diesel today at prices indicative of the crude oil price of $106. This gap – old crude oil and new prices – is pure margin. This appears directly in the profits of refining companies.
That’s signal 1.
The second signal is a default in futures contracts. This sounds technical. It’s not like that. Here’s everything you need to know.
When the oil futures curve is at UnderdevelopmentIt means that short-term contracts are trading above longer-term contracts. Simply put, buyers are paying a premium to get oil now rather than later. This tells you right away that the market believes supply is too limited to absorb the shock.
This is exactly what WTI futures are showing us today. Front-month contracts rose as refiners, hedgers and institutions made payments for immediate delivery. Additional contracts through late 2026 flatten significantly.
In short, the market is seeing supply pressures in the near term but expects conditions to improve over time.
This distinction is important because it tells us where capital is flowing now – to assets associated with scarcity and near-term pricing power. Refineries. Select producers. Names with direct exposure to US domestic supply chains.
When the crack spread expands and the futures curve declines at the same time, the market is sending a clear two-part message: refiners are making big money right now, and institutional energy traders are paying a premium to secure supplies immediately.
This combination — margin expansion plus supply urgency — historically occurs when stocks of refining companies and energy names make their biggest moves to the upside.
It is the setup for a bullish trade on oil and oil refining stocks.
Here’s how that trade looked in practice earlier this year.
Trade that proves the signals work
Back in April, both signals were released at the same time.
The spread of the crack was expanding. The WTI futures curve has been moving backward. One name kept popping up on my radar: CVR Energy Company (AIDS). It is a mid-sized independent liquidator with direct exposure to exactly the type of margin environment that the signals were pointing to.
On April 20, I placed members in a bullish position on CVR at the beginning of the month. Setup was clean. The signs were clear. The risk has been identified.
In just one week, we achieved an 80% return on the late filter.
This is not luck. This is what happens when you stop trying to predict where oil is going and start reading what the market is actually telling you. The crack spread said refineries are making a lot of money. Supply was too limited to absorb the shock, the default said. The CVR was the most direct way to express this view with specific risks.
Catalyst. signal. commerce. This is the whole model.
Now, both signals are fired again.
The crack spread is spreading faster than it has been in months. The WTI futures curve is deep in backwardation. The UAE’s exit from OPEC has added a layer of structural uncertainty that will not go away quickly. The Strait of Hormuz is still under pressure.
The setup that gave us CVR is back. The names that benefit most from this environment are the same names I have been monitoring since the conflict began: refiners, select producers, and companies that deal directly with US domestic supply chains.
The question now is not whether the opportunity exists or not. It’s a matter of whether you have the tools to find it before Wall Street does.
What I do about it – and how you can too
Here’s something I tell my members all the time: Know what you’re good at…and know where you need help.
I’m good at reading fluctuations. Find the setting. Recognize the signal before the audience sees it. The hardest thing — for every floor trader I’ve known — and for me is the trend. Not whether volatility is coming. But whether the next big step will fall or fall remains to be seen.
This is the place Mark Chaikin Comes a turn. Mark has spent decades building quantitative tools used by Wall Street’s largest institutions to predict market direction. He designed his money flow system to answer a different question than mine. I focus on where volatility is building. Mark focuses on whether institutional money flow confirms the trend.
My experience is to find where volatility creates opportunities.
Mark’s expertise is in knowing which way it breaks.
Together, we’ve built something that combines both. We call it Convergenceand on May 28 at 8 p.m. ET, we will go live with him for the first time. (You can reserve a seat for this free event now.)
The global oil system is cracking. The two signals I showed you today actually go off simultaneously. And the window before Wall Street catches up is, as always, shorter than it seems.
This event is free. This is the first time we have integrated these two systems in front of the public.
Reserve your place here. Don’t miss it.
The creative trader always wins,
Jonathan Rose
founder, Master of Commerce
note: Jonathan makes an important point in today’s article: Major market moves often begin long before they are fully explained by the headlines. That’s a big part of what it is and Mark Chaikin Plan to discuss during their free time Peak convergence It happened on May 28th. They will explain how to combine volatility analysis with institutional money flow signals to spot potential opportunities early. If you have not already reserved your seat, You can do that here.
