Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will the Crude Oil Price Crash become even Worse in 2016?

Commodities / Crude Oil Jan 20, 2016 - 06:42 PM GMT

By: Sol_Palha

Commodities

A patient mind is the best remedy for trouble- Plaut

2015 was not a good year for speculators trying to time the oil markets.  Oil kept cutting through each support level like a hot knife cutting through butter. It would give the appearance that it was ready to mount a rally, but that rally would fade, and oil prices would drift lower.  We penned an article in Nov of last year, where we stated that oil would have to close above $50 on a weekly basis for it to see higher prices.  However, it failed to do that and drifted lower.  When it closed below $32 on a weekly basis, it neutralized any tiny bullish signals it was issuing in 2015.  Is oil close to putting in a bottom or will it once again let everyone down and plunge into a series of new lows.  There is a saying that the cure for low prices is lower prices and vice versa; having said, that we expect one final wave of selling before oil bottoms out and starts to trend slowly upwards.  We do not expect any violent upward reversals unless the situation between Iran and Saudi heats up to the point that a new war breaks out.


According to the IEA, oil demand for 2016 is expected to remain almost unchanged from 2015. In 2015, it stood at 96.43 million barrels per day (Mb/d) and in 2016, it is expected to be 96.49 Mb/d.

The interesting part is that the IEA expects supplies to drop from 96.97 Mb/d to 96.88 Mb/d; the IEA is generally notorious for missing its projections.  We are not sure that the current projections fully factor in the new supply of Iranian oil set to hit the markets. Additionally, Russia has stated that they have nointention of cutting down oil supplies and the same holds true for Saudi.

Russia pumped a record 534 million tons of crude oil in 2016, and the country’s oil and gas condensate production increased by 1.4% year-on-year. 

Bloomberg noted that Russia’s oil production was poised to challenge its post-soviet record in the last of week of 2015 and surge to 10.86 million barrels per day. On the same token, Saudi Arabia instead of cutting production has been pumping oil close to its maximum capacity.  From the supply side, there are no positive factors that would contribute to a sustainable upward trend for oil.

What you need to remember is that the oil market tanked suddenly, and this occurred while the Top Analysts were making calls for higher prices and also by the Peak Oil theory experts. What happened to the peak oil theory by the way? Instead of oil production peaking, we seem to be awash with oil. And the Peak Oil experts have vanished into the woodwork. Hence, just as the oil market collapsed when everybody was proclaiming higher prices, oil will probably stabilize sometime in 2016 as everyone expects it to keep crashing.  As it has broken through several levels of support, it will need to trend sideways for an extended period before it has any hope of breaking out. 

As it has closed below the psychological level of $30 on a weekly basis, it is likely it will experience one more downward wave before a tradable bottom is in place.  A move to the $23-$25 ranges is now a strong possibility, and as long as oil does not close below $23.00 on a weekly basis, oil will start putting in a slow bottoming formation.  Once a bottom is in, do not expect miracles from oil,  trading will probably be limited to a tight range of $24.00-$36.00 for some time.   Only a monthly close above $40 will signal that the trading range is going to shift to a slightly higher zone of $36.00-$58.00 with a possible overshoot to $65.00.

Two small bullish factors; MACD’s putting in a series of higher lows, and so they are diverging from the price of oil and RSI is holding steady; it has not dipped to new lows yet.

The carnage is not over yet, and so we would hold off getting into oil stocks as many companies are going to go belly-up as their debt becomes unserviceable; this will create great opportunities in this sector, but, for now, it would be better to hold onto your gunpowder. 
A better play for speculators (the keyword being speculators) would be to play this sector directly via ETF’s such as UCO, OIL, and USO, but we would wait till oil, at least, trades down to $25 or better before deploying any funds into this sector.

Conservative players would be better off waiting for the dust to settle down. There will be many great stocks to purchase later on in the year. Many companies in the oil sector will go bankrupt as they will soon be unable to service their debt and then you will be able to come in and pick up the players best poised to benefit from higher oil prices.

An ounce of patience is worth a pound of brains.

Dutch Proverb

by Sol Palha

www.tacticalinvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

© 2016 Copyright Sol Palha- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in