Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside

Commodities / Crude Oil Jan 16, 2018 - 09:06 PM GMT

By: Boris_Dzhingarov

Commodities

Crude oil is starting out strong in 2018 as both the international Brent benchmark and the West Texas Intermediate continue to book price gains. The gains in crude oil prices this year is riding the waves of the uptrend in oil prices that began in 2017. Now, the U.S. West Texas Intermediate is trading up around $63.57 per barrel and the Brent crude is trading up around $69.20 per barrel. 


Commodities analysts and experts are becoming more optimistic about the prospects of crude oil this year. Analysts at Citigroup have hinted that they expect crude oil price to move into the $70 to $80 range as geopolitical uncertainties reduce the supply. Bryon Wien of Private Wealth Solutions opines that crude oil will cross $80 per barrel because “demand is going to continue to increase faster than supply.”

Despite the obviously predominantly bullish trend in the market, some commodities experts are sounding notes of warning that it might probably be too early to conclude that crude oil is back to winning ways.  Below are some of the factors that could precipitate a bearish case for crude oil.

Factors that could send oil prices lower

To begin with, much of the volatility that crude oil prices suffered in the last three years is a function of the battle for market dominance between OPEC and U.S. Shale oil producers. OPEC had initially refrained from arresting the freefall in oil prices in the hopes that the low prices will make shale drilling unprofitable and force U.S. shale oil producers out of the market. Interestingly, shale oil producers have shown an impressive resilience to stay afloat even when oil was as low as $39 per barrel.

Hence, you can reasonably imagine that the current uptrend in the price of crude oil will make it easier for shale oil drillers to pump out more oil and trigger another supply glut. In the words, a Carrie Young, a commodities analyst at Wilkins Finance, "it would be foolhardy to ignore the lingering concerns about the possibility of a short-lived bullish rally as U.S. shale expose oil to bigger downside risks."

Secondly, the demand for crude oil could start to drop off as the worst part of winter ends and there's less need for crude for heating purposes. Another factor that could trigger a decline in the demand for crude oil is the fact that Asian refiners have taken advantage of low prices in the last three years to book huge profit margins. For instance, Chinese diesel exports have jumped more than 3000% to 2 million tones and its gasoline exports has surged more than 365% within 2 years to more than a million tons in December 2017.

However, the recent uptrend in oil prices will inevitably trigger a decline in the margin of Asian refiners. The drop in margin could in turn cause Asian refiners to reduce their demand for crude oil in the hopes of forcing a decline in prices.

Analysts preach caution and restraint

Some stakeholders in the global crude oil market  are worried that the objectively bearish sentiment outlook on the crude oil market are being drowned out by the cacophony of bullish voices. In the words of Ole Hansen, head of commodity strategy at Saxo Bank, "bullish news tends to get more attention than potentially bearish signals."  If the bearish signals come into play on oil prices, it won't be surprising of the current uptrend stalls and the price of crude oil declines into correction level.

By Boris Dzhingarov

© 2018 Copyright Boris Dzhingarov - 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

6 Critical Money Making Rules