Technical analysis is dangerous for people who don't understand it, or those who look for the patterns they want to see. It always makes me roll my eyes when people start shouting out technical patterns that haven't fully formed. A partially formed (unconfirmed) chart pattern has ZERO predictive value. Every upward price channel creates multiple partial double tops on the way up, and every downward price channel forms multiple partial double bottoms on the way down.
Even if it reaches the previous top and starts to pull back a bit, it still isn't a double top. Why can't some people get it through their skulls that it's not a double top/bottom until it breaks the trough? A double bottom like a W, and a double top looks like an inverted W (in a font where the middle is lower than the sides). Looking at the WTI chart, I see a double bottom, confirmed at the beginning of March.
I think the next pullback will bottom out between 38 and 42, if it comes soon. If the rally continues to the upper 40s before a pullback, then it might only pull back to the mid 40s. If you're looking for 32 again with U.S. production in a sustained downtrend, you're going to be disappointed.
Thanks. I do want to make it clear, though, that I'm not making any KINGCALLs by any stretch of the imagination. I don't think the conditions exist for a long term bull market, I just think oil prices overshot to the downside to fundamentally unsustainable levels, and it was inevitable that they'd bounce back to at least the mid 40s.
I wouldn't be surprised to see the uptrend continue and crack 50 heading into driving season, but it's not obvious enough to me to be worth betting on. I *would* be surprised to see 60 anytime in the next few months, and might jump back in on the short side if that happens.
I think equilibrium now is around the mid 40s, and prices will keep being pulled to this level like a magnet, as they have for the past year. The equilibrium price might drift up into the 50s, depending on how long and how deeply U.S. production continues to drop, but a bull market is not in the cards because the upside is still capped by the same fundamentals that made prices crash in 2014-15, and there's no good reason to think those fundamentals are going to change in the next few years.
Good call. I stayed long after the inaction at Doha too. I've been saying for a while, it's not all about OPEC and producers' meetings and coordinated cuts!
As I mentioned at the time, when Saudi oil minister Al-Naimi said a couple of months ago that the market will rebalance oil supply and demand, leading to higher prices, what he meant was "We don't need to cut, because low prices will force cuts by higher cost producers, especially U.S. frackers, Why should we voluntarily give up market share when other countries will be forced by economic law to cut production instead of us?"
Well, U.S. production has been down for 7 consecutive weeks, 12 of the last 13 (the only exception being a lousy 1kbpd increase reported March 4th), and has been in a sustained overall downtrend since July. Throughout this downtrend, rig counts have continued falling, even recently while prices have bounced back into the 40s. This downtrend is NOT stopping anytime soon.
That said, I did take half my position off the table yesterday and switched the other half from UWTI to UCO, and I think maybe now it's time to sell out altogether. A bounce from sub-30 to the mid 40s was obvious, but it's more iffy going forward. I do think it's still in an uptrend, but it looks ripe for a pullback soon.
I don't know why either. Are you new to this board? rexmundixed is just a noise machine. Keeps saying USO is going to 0, as if oil is going to be produced at a loss and given away for free. He reminds me a lot of hyperinflation_hyenas from the SPY board.
Depends on how long it lasts. Reports I've read say it's a 1.5 mbpd daily hit. So, for as long as the strike lasts, that takes care of the entire oversupply problem and then some. And with oil prices still in the toilet, producers have a diminished incentive to cave to the strikers' demands.
It's a fallacy to say that if the war hasn't boosted oil prices, it somehow follows that the strike won't. First of all, prices *have* been trending up recently. Do you have a gauge to measure exactly how much of that can be attributed to the war at any given time, so that you can rule out any significant impact?
Second, the war hasn't significantly disrupted production as of yet, so at this stage any effect it has on price is based on fear that there might be supply disruptions in the future. The strike has a direct, immediate, definite, measurable impact on supply. Its effect on price isn't based on anticipation of what *might* happen. It's based on what actually *is* happening.
Good call. Well, it's down, but just barely. Too bad for a couple of testy people, that clicking the thumbs down button on Yahoo doesn't change reality. ;)
The technicals as I see them are pointing to a likely breakout from here. The Doha meeting being a week away, with all indications that an output freeze is practically a done deal, makes that even more likely.
What you're describing is more typical of the way oil usually trades during uptrends, so I can't rule it out, but I think under current circumstances the best strategy is to just hold. It *might* pull back a little or might not, but either way it's almost definitely heading higher. So it makes more sense to hold and *maybe* have to ride out a temporary pullback before gaining more, than trade on the assumption of a pullback and possibly miss the boat.
LOL, that's nothing! A year ago kingly was saying that buying USO at 20 and 21 was "a no-brainer" and "easy money", and that it was heading to 23 and beyond "very soon".
Later it was easy money at 19...and then at 18...and then at 17....
Very bad idea. The recent pullback was not surprising, but I think this time oil prices are really set to take off.
As I've been saying for a while was inevitable, the low prices have forced a trend toward declining production, without coordinated action. For a number of reasons, crude production is very slow to react to prices, and this is true in both directions. Now that US production is in a sustained downtrend, the contraction isn't going to stop anytime soon. It certainly won't be curbed by prices in the 40s, or even a temporary excursion above 50. Given the recent history, the entire balance of the oil market would have to shift sustainably before there would be any significant wave of new investment in production.
Meanwhile, production from several OPEC members has started to show signs of decline even without coordinated action. The fact that low prices are limiting production anyway is all the more reason why OPEC is very likely to agree to a freeze at Doha. They really have nothing to lose and everything to gain from an announcement of "agreeing" to do what is happening anyway that would boost the price of their product.
Furthermore, not just today's EIA report but also the reports of the last few weeks, if you look at the details, indicate that the trend of rising inventories is leveling off and likely to change direction. And if that's already happening now during the low season for oil consumption, driving season is likely to resolve the glut.
I think oil is going to the upper 40s and very likely will poke above 50 in the next few months. I wouldn't even think of shorting it even for a quick technical pullback at least until it test resistance around 43.50, but really I don't think I'd consider a short position again unless it goes above 50 (subject to an assessment of where the industry stands at that time).
You're changing the subject. I was talking about the likelihood of another significant drop in rig count this week.
I wouldn't be so sure. The downtrend in the rig count has been slowing down and paused last week, so it may be time for a snapback. SO many rigs have been parked in recent months, and prices rallied back to 40 last week, so it doesn't seem likely that there will be another big reduction this week.
Not saying it can't happen, just saying it's not likely. I wouldn't bet on it.
It's easy to make assertions, but you'd be hard-pressed to find any basis whatsoever to justify a prediction of a multi-year bull market for oil.
It's going up because it overshot to the downside, due to various reasons why oil production is very slow to react to lower prices, and got to the point where it's barely profitable, but the circumstances to support a long term bull market just don't exist, and there are hard fundamentals capping the upside - the same fundamentals that precipitated the price crash in the first place. I can see WTI going back to 50, maybe even 60 as US domestic production continues to slide for some time, but I doubt we'll see 80 in inflation-adjusted dollars in the next decade.
If oil price have the termerity to touch 60 any time in the next couple of years, than unless it's driven by some unforeseeable significant shift in the fundamentals, I'll be going all-in DWTI.
Keep in mind that shale production is getting cheaper, so the upside is actually more capped in the future than it has been in the past year.
I think that was a good move. I still think that in the longer term, prices under 40 are unsustainable and production levels will come down with or without a coordinated cut, but the short term fundamentals are applying too much downward pressure for a continuation of the recent run to be likely.
Nice job if you took profits this morning. I took profits a little early, selling UWTI on Thursday EOD, but I made up for it by buying SCO yesterday afternoon and riding it for 10 points. I'm totally out now, looking to start averaging into a long position again after more of a pullback, probably somewhere around 34 - 35.
Actually, it was even higher than that. I distinctly remember him saying that buying USO at 22 was "a no-brainer". Maybe he's just confused about the meaning of the expression "no-brainer", and doesn't realize it's supposed to mean an obvious decision rather than something you do if you have no brains.
If repeatedly crowing throughout that summer of 2008 that it was "a once in a lifetime opportunity to buy financial stocks" didn't get the show cancelled, why do you think this would? And what about Jim Cramer, who told people to buy near the peaks and sell at the absolute lows repeatedly through the financial crisis (timed his inverse calls on both ends almost to perfection on AAPL, RIMM, GOOG, and X), and actually encouraged people to buy BSC in the days just before it went bankrupt? He's still on the air.
Since when do accuracy, sensibility, or knowing what one is talking about (or in Cramer's case, honesty) have any relevance to who gets air time on CNBS?
BTW, if the EIA report happens to show a substantial build, don't even THINK about posting a response trying to gloat about it. I haven't made any predictions about the EIA report, and if you think I have, you can't read.
"The API report is solid as a rock"...do you know ANYTHING about the topic you're talking about??? The API report is notoriously unreliable. I'm surprised there's any reaction to it at all anymore, considering how much it's been contradicted lately by the next morning's EIA reports, whose reliability is supported by mandatory reporting. Furthermore, it's not all about crude inventories. Last week's EIA report showed a build in crude, but a substantial draw in overall petroleum inventories, and crude prices spiked and kept going up. Idiots who only read the headlines thought it was a bearish report and got caught on the wrong side, and considering what a big deal you're making out of the silly API report, I'm wondering if you're one of them.
The API report is hardly news at all. The real news comes out at 10:30 in the morning. And if the EIA report shows something very different than the API report, then you'll see how little effect the "rock solid" API report has.