Oil Markets Gap on Headlines, Traders Must Be Cautious

Oil markets have become extremely sensitive to headlines in recent times. Over the past month, there have been six noticeable gaps in the oil chart since July, with four of them appearing after weekends and two during trading weeks.

The market closes on weekends, but global events can occur while trading is paused, leading to price jumps when liquidity returns upon reopening. This phenomenon is known as a weekend gap.

However, not all gaps are created equal. A gap may close if the initial reaction was exaggerated, or it can remain open if it reflects a genuine change in supply expectations.

The author approaches oil gaps with caution, first watching what happens after the gap forms. If price holds outside the previous range and continues attracting momentum, they consider the gap evidence of a genuine repricing, making fading the move unnecessarily risky.