Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why You Shouldn’t Sell Crude Oil

Commodities / Crude Oil Jan 14, 2013 - 11:05 AM GMT

By: InvestmentContrarian

Commodities

George Leong writes: When oil prices recently fell to below $80.00, I said don’t sell.

The U.S. Energy Department increased its projections for crude oil prices for this year, adding that global oil consumption will rise to a record high in 2013. (Source: “U.S. Energy Department Raises 2013 Oil Forecast,” Bloomberg, January 8, 2012.)


Take a look at the price chart for the December West Texas Intermediate (WTI) futures contract. After trading at $115.00 in May 2011, we have seen oil prices slide, despite multiple attempts at rallying back to the $100.00 level. The spot WTI is trying to hold at its 50-day moving average (MA), currently above its 200-day MA of $85.08.

Yet the chart is displaying what looks like a bullish flag formation setting up, which means that higher oil prices could be coming, rising above $100.00 in the best-case scenario, based on my technical analysis. You need to be watchful of the $80.00 support level, which was breached on several occasions, but in each case, there was a rally after.


Chart courtesy of www.StockCharts.com

I believe oil will continue to hold above at least $80.00 a barrel going forward and will rally as the global economy strengthens. If you extend the oil futures contract to 2021, the current prices range from $83.00 to $96.00, so I’m not that worried and don’t have the urge to go and sell.

Helping to add support will be the continued erosion in the major economies in the eurozone, along with its impact on the U.S. and China.

Also add in the geopolitical issues in the Middle East. Iran and North Korea are real threats that could easily drive up oil prices.

I also expect oil prices to be supported by the oil cartel Organization of Petroleum Exporting Countries (OPEC). OPEC estimates oil prices in nominal terms could hold in a range of $85.00–$95.00 a barrel for the rest of this decade, according to its internally produced World Oil Outlook report. The report blames the spikes in oil prices as driven by speculators, which I fully agree with, but it is part of the business. An interesting note in the report is the assumption that oil will reach $133.00 per barrel by 2035.

It’s interesting to understand how those behind the oil cartel think. The report says the current level in oil prices is due to the state of the global economy, “marked by below average trend growth, in combination with high unemployment rate in developed economies and continuing global growth imbalances.”

And while oil prices are estimated to trade below $100.00 a barrel for the next eight years, you know that there will be volatility that could drive prices to well above $100.00.

In my view, I would be looking at accumulating—NOT selling—oil stocks on weakness.

Source: www.investmentcontrarians.com/stock-market/why-you-shouldnt-sell-oil/1227/

By George Leong, BA, B. Comm.
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

George Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. See George Leong Article Archives

Copyright © 2013 Investment Contrarians- 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.

Investment Contrarians Archive

© 2005-2022 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