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Technically and Fundamentally, Where Is the Price of Oil Headed?

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21 comments on Technically and Fundamentally, Where Is the Price of Oil Headed?

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$WTIC West Texas Intermediate daily light crude courtesy of StockCharts.Com.

$WTIC Technically Speaking 

If Tracey picked $83 on purpose, as I suspect, it’s a great point of contention. There is strong resistance at $83. 

There is strong support at $70 and $72. Technically, we appear to be in a sideways channel. 

Assuming $83 is taken out on something other than a short head fake back into the channel, there is resistance at $90, $94, and $98, any of which could end a rally, assuming there is a rally.

$WTIC Weekly Chart

$WTIC West Texas Intermediate weekly light crude courtesy of StockCharts.Com.

The weekly chart provides nothing technically other than more confusion.

Depending on how fat one wishes to make their crayon, the weekly pattern can be  drawn as a symmetrical triangle, a descending triangle, or perhaps a descending wedge or channel, each with their own interpretation.

So yes, LOL technically.

By the way, TA does not “predict” anything. It’s most useful function is to provide entry and exit points.

All Comes Down to China?

The article says “It all comes down to China.”

Well, it doesn’t. 

What about a recession in the US or EU? What about general global weakness? Some perceived progress in Ukraine? Action by OPEC?

My Call?

I don’t have a strong opinion now other than on potential Fed and political fallout.

If oil heads strongly higher, the market and the Fed will price in still more interest rate hikes, and Elizabeth Warren and President Biden will scream about big oil profits.

This post originated at MishTalk.Com.

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21 Comments
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StukiMoi
StukiMoi
3 years ago

“

The article says “It all comes down to China.”

Well, it doesn’t.

What about a recession in the US or EU? What about general global weakness? Some perceived progress in Ukraine? Action by OPEC?

“
It pretty much does come down to China.
Ultimately, in order to bid for oil, you have to be able to generate more wealth with the oil you buy, than what you pay for the oil. For the next generation, that’s increasingly a China-only proposition.
The rest of the once-were-relevant rabble, has largely been reduced to “making money of their ‘homes’”. Or, to making money of their parents’ homes; while being “activists” for one harebrained non-idea or another. Or perhaps, as in Japan and Russia (And Ukraine…): To die of old age, Vodka poisoning or vodka facilitated barfights in Donbas. None of which renders them in much of a position to bid for oil against people capable of adding numbers, building roads and other such superhuman displays of aptitude and competence.
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TheCaptain
TheCaptain
3 years ago
“By the way, TA does not “predict” anything.”
So wrong. Elliott waves DO predict direction and even price levels. Avi Gilburt is the founder of ElliottWaveTrader.net. You should go read up on his stuff before making these broad statements. Search for his HUI chart from marketwatch from 2015 and then compare it to the HUI chart and then come back and tell me that TA has no predictive capability.
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Doug78
Doug78
3 years ago
Reply to  TheCaptain
There are more false breakouts and breakdowns for every confirmed breakout or breakdown no matter what TA system is used. A successful TA system would bring in enough participants as to destroy it very quickly since people would be trading in anticipation.
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Doug78
Doug78
3 years ago
Normally oil prices depend on whether the big economies of the world are in expansion or recession divided by the amount of oil available but we have had some changes that have significantly changed the equation.
1) The US is now a big exporter of energy and will continue as such. That is a big chunk of extra supply.
2) Europe’s economy is weak but still not in recession.
3) China has opened back up but is suffering from some severe economic disruptions.
4) The cap on Russia’s oil price has resulted in not too much drop in volume but a nice drop in price as those who buy it can demand and get big discounts.
5) Alternate sources in wind and solar, subventioned or not, have now become a big enough part of the total energy package as to be able to influence overall energy prices.
6) Nuclear is back to being sexy again.
Of these points 1) and 2) will not change soon. Point 3) will but not right away. Point 4) is the new normal for Russia. I see points 5) and 6) as the most important of all because they do change the way the world will work from now on when it comes to energy.
To sum it up, in the last twenty years we have seen a dispersal of where and how one can get energy. It used to be concentrated in a few places in the world like the Middle East, Russia and a few others much smaller players when it came to exports. Geographically is was concentrated. Now you can have a mix of some oil, some gas, some wind and solar and some nuclear to top it off. That gives countries flexibility and that does not mean good things for the price of oil. Before the only way to get oil prices down is to throw the world into recession. Now that is no longer necessary because oil has some real competition and energy can come in enough quantities as to put a lid on the price of oil for the next few years at least.
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1-shot
1-shot
3 years ago
Reply to  Doug78
And there’s the biggest one of all…
7) OPEC – They still have a lot of influence on prices when they decide to work together
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Doug78
Doug78
3 years ago
Reply to  1-shot
OPEC is a given for sure. They want to keep prices not too high and not too low so they could be seen as a moderator but that could change. I am curious how they will manage Russia’s decline as a big oil producer. Will they prop them or drop them?
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1-shot
1-shot
3 years ago
Interesting comment this weekend from Chevron CEO. Energy companies are essentially all transitioning to renewables. However, aprox 80% of world energy is produced using fossil fuels!
I!m all for green energy, but we’re a LONG way off from transitioning. In the meantime, reduced exploration and development of oil and gas due to woke political pressure and higher taxes will only mean higher oil/gas prices in coming decades
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Zardoz
Zardoz
3 years ago
Reply to  1-shot

… which will reduce demand, and consumption, which is the point.

People think they have an unalienable right to cheap gas to power their meaningless journeys to nowhere.
They don’t .
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  Zardoz
I do … life, liberty and the prufit of happineff.
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Doug78
Doug78
3 years ago
Reply to  Lisa_Hooker
You are typing with a lisp. You should get that looked into.
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Call_Me
Call_Me
3 years ago
Reply to  Doug78
Digital isn’t always best – sometimes it looks better when someone puts pen to parchment-
Call_Me_Al
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MikeC711
MikeC711
3 years ago
Reply to  Zardoz
I think central economic planning would be much easier if everyone was as eager as you are to drastically reduce their living standards.
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Matt3
Matt3
3 years ago
I just don’t see a recession. I don’t believe the Fed could stand the political pressure. I think inflation will be accepted and redefined to keep real interest rates negative. The government is the debtor and that’s the best way to handle debt.
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  Matt3
Growth is when the prices your neighbor pays go up.
Inflation is when the prices you pay go up.
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Jack
Jack
3 years ago
Reply to  Lisa_Hooker
So the trick is not to buy anything. Kinda makes sense.
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QTPie
QTPie
3 years ago
It’s pretty crazy when you think about it… here in the US, the price of both oil and gas is below what it was before a major worldwide supplier was essentially taken offline a year ago due to war. Shows you how the market adjusts to things.
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Matt3
Matt3
3 years ago
Reply to  QTPie
Oil was not taken offline. Oil was shifted.
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Doug78
Doug78
3 years ago
Reply to  Matt3
And capped.
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worleyeoe
worleyeoe
3 years ago
Where’s PapaDave when you need an answer to such a simple question? Up baby up, that’s where it’s headed. It’s almost spring, no?
I would love to see $5 gas return. More fuel for inflation means higher FFR & higher chance of a recession, a real one to boot.
I love seeing JPowell update his dot plot upwards every month with no idea when it will peak. GO BIG OIL!
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PapaDave
PapaDave
3 years ago
Reply to  worleyeoe
Short term is anyone’s guess. Longer term, its easy to see higher prices because of continued weak capex spending by oil companies all over the world for the last 7 years and for the rest of this decade. Which means continued restricted supply going forward while demand continues to grow.
My prediction for 2023 remains a range of $70 to $120, with an average price of $90 to $105.
At the current price of $80, oil companies are still gushing cash flow. Using that cash, most of them have already hit their low debt or no debt goals. And they are committed to returning their excess cash to shareholders now through dividends, share buybacks, or both.
At $80 WTI, free cash flow is around 20% for most of these firms. Add 5% FCF for each additional $10 in WTI.
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8dots
8dots
3 years ago
1) After CL hit minus 40 WTIC bounced back up and built a Lazer tilting up. 2) WTIC linear, line chart : June 8 to Aug 24 2020. WTIC breached this Lazer and hug it from below. Hugging is illegal. 3) There was an oil glut in the 80’s and the 90’s. Thereafter CL built a bubble. U cannot build a bubble without backbones. Backbones create congestion areas around them. 4) The first congestion area, monthly : Oct/ Dec 2004 : 55.67/ 40.25. 5) WTIC to mid 40’s.
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