Crude at $120+: Real risk or expiry noise? Anil Singhvi explains why traders shouldn’t panic

Crude oil prices have risen sharply in recent sessions due to geopolitical concerns and adjustments in futures markets, but traders should avoid panic at current levels, said Anil Singhvi.

Singhvi said the recent spike is largely linked to developments involving the United States and Iran. He noted that the US has rejected a proposed deal with Iran, reducing the chances of a near-term agreement and creating uncertainty around oil supply.

Donald Trump said, “We’re having talks with Iran. They’ve come a long way. The question is whether they will go far enough. At this moment, there will be no deal unless they agree that there will be no nuclear weapons.”

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“Crude has moved up due to two key reasons. One is the rejection of the Iran deal by the US, and the second is the slowdown in negotiations. This has supported prices,” Singhvi said.

Why did crude prices surge?

Brent crude prices surged sharply on Thursday, rising as much as 7 per cent amid reports that the United States is considering potential military action against Iran, raising concerns of further supply disruptions in the Middle East.

Brent crude for June climbed USD 6.81, or 5.8 per cent, to USD 124.84 per barrel, while the more active July contract traded around USD 113.78, up 3 per cent. US West Texas Intermediate (WTI) crude for June rose USD 2.76, or 2.6 per cent, to USD 109.64 per barrel.

Both benchmarks are on track for a fourth straight month of gains, with Brent prices rising over 97 per cent and WTI more than 90 per cent over the past year. Since the start of the year, Brent has more than doubled, hitting its highest level since March 2022.

The rally follows ongoing tensions after air strikes by the US and Israel on Iran earlier this year and disruptions in the Strait of Hormuz, a key global oil supply route. Reports said Donald Trump is set to review plans for further strikes on Iran to push it back to nuclear negotiations, while talks remain stalled over key issues.

Meanwhile, OPEC+ is expected to consider a modest output increase of around 188,000 barrels per day, even as the United Arab Emirates prepares to exit the grouping, potentially weakening its control over supply.

Prices near USD 120 raise concerns

Singhvi added that crude prices briefly moved near the USD 120–USD 121 per barrel mark, which may appear alarming at first glance. However, he advised traders to look beyond headline prices and understand the structure of futures contracts before reacting.

Expiry-led short covering behind spike

Singhvi explained that the June futures contract is nearing expiry, and the last day of the series often sees volatility due to position adjustments. He said traders who had taken short positions earlier in the series are now forced to cover their positions, leading to a sharp rise in prices.

“Today is the last day of the June series. In such situations, short covering can push prices higher. This does not always reflect fresh buying or a strong bullish trend,” he said.

Focus on July contract for real trend

He pointed out that while the June contract is trading above USD 120, the July futures contract is significantly lower, around USD 110–USD 112 per barrel. This gap of nearly USD 9–USD 10 indicates that the market is not uniformly pricing crude at elevated levels.

“Traders should focus on the July contract, not just the June price. If crude is at USD 121 in June, the effective level for the next series is closer to USD 112,” Singhvi said.

He said this difference is important for assessing the real impact on markets. According to him, the perception of risk becomes exaggerated if traders only look at the higher expiring contract.

“If you assume crude is at USD 120-plus, it may create panic and expectations of further rise to USD 130 or USD 140. But the data shows the next series is much lower. So, panic is not warranted at this stage,” he said.

Panic only if July crosses USD 120

Singhvi clarified that crude at current levels remains negative for markets, but the extent of concern should be measured. He advised traders to maintain the same cautious stance as earlier, without increasing fear based on temporary spikes.

He added that panic should only arise if the July futures contract crosses the USD 120 mark, which would indicate a broader and sustained uptrend in crude prices.

“Be negative to the extent of USD 112, not USD 121. Panic only if the July contract crosses USD 120. Until then, there is no need for extreme reaction,” he said.

Singhvi also emphasised the importance of understanding market data rather than reacting emotionally to price movements. He said traders should track both current and next-month contracts to get a clearer picture.

“Do not panic unnecessarily. Risk is there, but it is controlled for now. Watch the July series closely,” he said.

Crude oil remains a key factor for global markets, as higher prices can impact inflation, currency movements, and equity sentiment. However, experts suggest that short-term spikes linked to expiry and positioning should be analysed carefully before concluding.