Oil price discussion and analysis

Re: OIL AGAIN!

Page said:

We can see a bounce in crude oil till $62 bbl in a week or two. Crude Oil is once again going to move towards its high.

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DOWN -$3.95 (-8.64%) to $41.78 bbl as I type.

Re: OIL AGAIN!

boyley said:

I would say by autumn here there will be a significant rally, but untill then its choppy waters.

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That is the outlook that I most favor. While the low 30's were shown to be a very strong price floor the high 40's provided a strong price ceiling.
Can't expect much to change in the short-term
OPEC cuts will take time to effect inventories and those cuts as well as a reduced supply from non - OPEC producers coupled with increased consumer confidence should blow the price roof away before the floor, IMO

Nice link Basilio, cheers

Re: OIL AGAIN!

This thread began in 2005 with Waynes posting of a Peak Oil report which saw oil production peaking by 2014.

In fact the evidence seems to be that oil production has peaked far earlier than that - probably in June 2006. There are also huge problems in the industry with aging infrastructure and an aging workforce. This all points to a very rapid rise in oil prices within the next 1-2 years as major oil fields deplete.

Excellent slide show presentation Matthews Simmons to Committee on Foreign relations encapsulates all the issues.

http://www.simmonsco-intl.com/files/Dallas Committee On Foreign Relations.pdf

Page 14 has a great table which outlines the orgin and amount of oil supplied to the world market since the early 70's. Matthew points out the peak oil production in June 2006

Re: OIL AGAIN!

I was having news on Crude oil till $25 but it has moved unexpectedly. Cannot tell the reason why it has jumped back. Seeing the US market conditions it was predicted $25 per bbl.

Re: OIL AGAIN!

Page said:

I was having news on Crude oil till $25 but it has moved unexpectedly. Cannot tell the reason why it has jumped back. Seeing the US market conditions it was predicted $25 per bbl.

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Hi Page,

My guess is after 7 months of continuous selling pressure bottom pickers and energy/commod opportunists have moved in to put a floor on the price (for now).

Hi guys,

Back once again with the weekly chart for oil. Technically, I should be posting this tonight after the final NY session for the week, but I will be at work tonight so take what you can get.

The weekly MACD still showing signs of crossing the trigger, with high volume continuing at the current prices.

Please remember, this is an oil ETF not any of the oil spot prices or a basket of such! DYOR!

Re: OIL AGAIN!

thanks for that sinner , I didn't read your graph properly from the 22nd Jan , So that answers my question from the 26 Jan about n1=12 n2=26 n3=9. good work.

Re: OIL AGAIN!

basilio said:

This thread began in 2005 with Waynes posting of a Peak Oil report which saw oil production peaking by 2014.

In fact the evidence seems to be that oil production has peaked far earlier than that - probably in June 2006. There are also huge problems in the industry with aging infrastructure and an aging workforce. This all points to a very rapid rise in oil prices within the next 1-2 years as major oil fields deplete.

Excellent slide show presentation Matthews Simmons to Committee on Foreign relations encapsulates all the issues.

http://www.simmonsco-intl.com/files/Dallas Committee On Foreign Relations.pdf

Page 14 has a great table which outlines the orgin and amount of oil supplied to the world market since the early 70's. Matthew points out the peak oil production in June 2006

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Nothing rocked my market confidence more than the oil price fluctuation.

In trying to determine oil price fundamentals and likely direction, when you look at price falling from $140+ to $40, this cannot IMO be explained by supply/demand factors, as they have not changed anywhere near that amount.

which leaves speculation as a major factor.

can it account for a 70% fall?

I dont think it can account fully, which means oil is probably oversold, and would be expected to rise again, to what level I dont know

Re: OIL AGAIN!

Hi guys, here is the daily chart by Chris Vermeulen with his commentary appended

http://www.safehaven.com/article-12462.htm

Oil is such a hot topic and investment, although I think most people are losing their shirts trying to pick a bottom. Buying at support when risk is very low after a trend line breakout and reversal candle, change in momentum, and everything else for that commodity looks to be in my favor is when I put my money to work. Oil Looks really tempting right here but I don't have a buy signal and I think its about to continue its slide lower in the next few days.

...

I don't want to sound like a broken record but it seems like everyone is bullish on Gold & Oil right now and if that's the case, almost everyone should be long, leaving only one way for it to go, down. We all work way too hard for our money and to toss our money in when things are like a yo-yo is just silly. Patients are a must in times like this.

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Re: OIL AGAIN!

Hi guys,

It's been a week and no activity on this thread?

I will continue with a couple of charts if that's ok with you.

The first chart is the USO daily, I have included it because the last volume bar is huge. I believe it is a record high volume.

The daily MACD is coasting the trigger line not really looking like it wants to cross down.

Second chart is the weekly, RSI and MACD included. Both are at a crucial juncture, and will either cross up or things become very bearish for oil.

Re: OIL AGAIN!

Your MACD line looks the same as my STO one....which is why I bailed from Santos on Friday.

Everything on the chart is leading to either UP or DOWN.

I'll look at getting back into an oil stock when the direction is clearer.

Re: OIL AGAIN!

Crude oil once again troubling investors. Crude oil is expected to come down till $25 were as we have seen it touching $45.

Re: OIL AGAIN!

Hi again,

Are you referring to the daily or weekly MACD, Go Nuke?

I have tried to model the scenario in another light.

The gold-oil ratio (how many oils for 1 gold) is one I have been watching for a long time now. It is probably one of the industrial worlds original economic indicators. Usually, I use the RSI as a good indicator, but with this chart (thanks to StockCharts.com) I have included the MACD to highlight a severe market dislocation.

As you can see, gold-oil used to trade happily +/-20 from 50 on the RSI. When the RSI turned red and dropped below 30 (gold only buys 6.5 oils), I thought at the time there was to be a BIG market dislocation. I never really predicted an overshoot like this. My guess at the time was actually a straight price rise in gold to return the ratio to normal levels.

What happened was a destruction of the oil price and strength in gold. We are now in result, and the phrase "market overshoot" has never applied more.

I fully expect the gold-oil ratio to return to normal levels. This will either involve a massive drop in the value of gold from current levels, a massive spike in the oil price, or a bit of both.

If oil is to jump to meet the historical 1 gold:10 oil norm we would need to see it at $90!

The Arabs will not be happy they need 23 barrels of oil to get their 1 gold.

Re: OIL AGAIN!

If anyone recalls before 2000 [1996-2000 period] when oil was trading at complete lows, we saw the emergence of growth sectors such as techs. The oil price in my opinion will not do much over the course of the next five years. It was the bubble of bubbles and will take time to sort itself out. I am unsure on the gold-oil ratio in bear markets. I do see growth sectors [non commodity based sectors] being sought after.

Re: OIL AGAIN!

hey sinner, keep the graphs coming. great stuff!

why do gold and oil need to trade at a certain ratio fundamentally speaking?
energy is needed for most/all production and thus human survival so oil does have some standing..

but if we fall into a global depression and the usd tanks then energy demand could stay low for years and gold could replace usd as the global wealth store

?

Re: OIL AGAIN!

In my opinion we need to seperate the wood from the trees and analyse what the markets would like six months moving forward. These are 'Big Ideas'.

Such as the big falls in inflation, technological innovation, emerging economies, and China’s appetite for raw materials are just a few. The 'Big Idea' that is now coming into fruition are the global stimulus packages; China inclusive. The only issue with 'Big Ideas' is the markets are slow to react for they are big. Pumping multi trillions globally into the economy is big.

As for gold being a store of wealth in future; I think we need to see some evidence in form of exchange other than trying to flog your cold coins on ebay...as banks certainly don't accept gold as a form of exchnage and you pay a fee for them to store it.

Re: OIL AGAIN!

Hi Phillip, thanks for your input. I share a lot of your views I see you posting about on various threads.

Phillip said:

In my opinion we need to seperate the wood from the trees and analyse what the markets would like six months moving forward. These are 'Big Ideas'.

Such as the big falls in inflation, technological innovation, emerging economies, and China’s appetite for raw materials are just a few. The 'Big Idea' that is now coming into fruition are the global stimulus packages; China inclusive. The only issue with 'Big Ideas' is the markets are slow to react for they are big. Pumping multi trillions globally into the economy is big.

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Hi Phillip, I unfortunately disagree that stimulus packages are the next "big thing". They are helicopter cash drops to big business and banks, an inflationary drop in a deflationary pond. Might make a ripple or two but soon submerged into the whole.

Not sure how you anticipate this will affect oil.

As for gold being a store of wealth in future; I think we need to see some evidence in form of exchange other than trying to flog your cold coins on ebay...as banks certainly don't accept gold as a form of exchnage and you pay a fee for them to store it.

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The only people who should be selling their gold on ebay now are those who were smart enough to buy at $400 and sell at $1500 thanks to the frenzied buying that goes on there. My bank might not accept a gold bar but I can take it to any jeweller who deals in gold or a bullion bank and get "first in line" service as they try and give me some cash to sell the gold on to the next sucker.

Again, not sure how small time gold has anything to do with oil.

why do gold and oil need to trade at a certain ratio fundamentally speaking?
energy is needed for most/all production and thus human survival so oil does have some standing..

but if we fall into a global depression and the usd tanks then energy demand could stay low for years and gold could replace usd as the global wealth store

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Hi kransky,

I had planned to write a long reply on this issue because it is a very interesting one to me. In the course of my research I discovered this link

http://www.incrediblecharts.com/economy/gold_oil_ratio.php

Which covers pretty much everything I had to say over a very good timeframe (several decades) and fundamental issues. You will note the very last line in the article puts us at a sell for gold right now (if you follow the ratio closely).

EDIT: Also, according to the Daily Reckoning editors, the ratio norm is closer to 1:15, which gives oil a price target of roughly 60USD, a bit more reasonable!

Re: OIL AGAIN!

Hi guys,

Once again another week and no activity on this thread? I had planned a small market wrapup on Saturday morning after the final NYMEX session for the week but got distracted by currency pairs.

It has been an interesting week for oil. USO has continued making lower lows since I last posted the chart. Not much has changed technically on the daily and the MACD refuses to budge so I will ignore it for now.

Instead I will focus on a new indicator I have been watching. My IG account does fixed capital trades, such as "Crude Oil to finish Up >someprice" the idea is the contract starts at 50 points and as the probability of the statement coming true increases or decreases the contract approaches 100 or 0 respectively.

I have found this to be a very good "smart money" indicator. The sentiment it displays is rarely incorrect and can detect very fast flows in oil sentiment. As an example, we can see the latest contract below, has already approached 100 and expired. I have included this to demonstrate short term bullishness on oil. Next time I will include a live contract.

As for longer term sentiment, I have once again included the USO weekly chart. The MACD has finally generated a buy signal despite last weeks bearish price action, with the line holding a smigden above the trigger (-13.963 > -14.029). RSI is also slowly trending up. Only time will tell whether this is a buy opportunity or a bear trap.

It seems the market is waiting to see whether OPEC nations will comply with announced production cuts. Apparently compliance rates for the last announced production cut was around 55%, so that means 45% of production by OPEC nations was still at pre-crash levels! Coupled with surging US stockpile inventories which undermine these cuts, things are not looking pretty.

Here is an article addressing this issue:
http://www.google.com/hostednews/ap/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD96CIM0G0

The final chart I have included to illustrate some interesting divergence between WTIC and USO which normally track together very well. Chart and small article from here

http://seekingalpha.com/article/120745-pay-attention-to-divergence-between-oil-price-and-etf

I believe this divergence can be well explained by this article:
http://seekingalpha.com/article/120724-trading-the-crude-oil-contango-with-two-etfs

Disclosure that I hold both oil and gas stocks but no direct exposure to oil price. So far my oil plays are doing pretty badly but the holdings are relatively small and derived from profit so not too concerned with holding them until the situation reverses (I am looking for the gold-oil ratio to normalise). On the other hand my gas plays are doing excellently!

Happy trading folks.

Re: OIL AGAIN!

sinner said:

Hi guys,
It seems the market is waiting to see whether OPEC nations will comply with announced production cuts. Apparently compliance rates for the last announced production cut was around 55%, so that means 45% of production by OPEC nations was still at pre-crash levels! Coupled with surging US stockpile inventories which undermine these cuts, things are not looking pretty.

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Another great anaysis.Oil dropping + 6% in line with gold rocketing up.Putting the fades away for a sunny day now.

Re: OIL AGAIN!

Thanks Wysiwyg.

From my markets eye view tonight watching CNBC and trading the early half of the US session, things are still pretty bearish on oil but oil traders on TV seem convinced 30 is a strong price floor. The last few weeks of volume would confirm this.

USO has gapped down today thanks to this bearish price action and I expect this gap to be filled at some point.

Re: OIL AGAIN!

sinner said:

...It seems the market is waiting to see whether OPEC nations will comply with announced production cuts. Apparently compliance rates for the last announced production cut was around 55%, so that means 45% of production by OPEC nations was still at pre-crash levels! Coupled with surging US stockpile inventories which undermine these cuts, things are not looking pretty...

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A Classic Catch-22.

Many of those OPEC nations are maintaining output "at any cost" just to try and survive, since oil sales are their only source of income. As the price falls, they still have to try and keep their production & sales UP even more than when the price was high, to maintain a viable cash inflow (in the short term) into their respective economies.

In any case, some of them will really be hurting now and if current oil prices continue to fall or languish on and on for much longer, I wonder which of the OPEC producers will become insolvent first?



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