Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Crude Oil Price Forecast 2015 and 2016

News_Letter / Crude Oil Sep 15, 2015 - 04:41 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter Sept 1st, 2015
Issue # 16 Vol. 9


The Market Oracle Newsletter
Sept 1st, 2015            Issue # 16 Vol. 9

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

Crude Oil Price Forecast 2015 and 2016

Click to Download Ebooks :

UK Housing Market EbookThe Stocks Stealth Bull Market 2013 and Beyond Ebook

Dear Reader,

The crude oil price has relentlessly trended lower all year to an unimaginably low price low of $37 of just a few days ago, falling from $100 a year ago. The severe bear market has not only caught many market commentators off guard but has had a devastating impact on several major economies that are heavily reliant on high oil prices such as Russia, the gulf states, and other emerging markets reliant on their energy sector tax revenues to finance state spending and of course Britain's very own Scotland that a year ago was toying with idea of committing social and economic suicide (independence referendum).

The following video aptly illustrates what would have happened not only in Scotland but in the whole of the UK during the past 12 months if the SNP separatist fanatics had succeeded in convincing the Scottish electorate into voting for Scottish independence that would have unleashed forces that literally would have torn the UK apart, something that the SNP fanatics continue to remain ignorant to today, this despite the fact that the oil price collapse of 2015 alone would have collapsed the Scottish economy fuelling the process for the disintegration of first Scotland and then the rest of the UK.

UK During the Year After Scotland Votes YES to Independence:

by SaveTheChildren (youtube)

A year ago the SNP fanatics were busy galvanising the gullible masses with a stream of heart tugging propaganda into convincing the Scots to effectively vote to commit suicide by leaving the UK which I liberally warned of the consequences in dozens of articles and several videos at the time of the catastrophe that lay in store for Scotland which would be the polar opposite of the SNP's propaganda, the reality of which would literally include the breakup of first an Independant Scotland and the remaining UK as excerpted below:

Sep 07, 2014 - Scottish Independence YES Vote Panic - Scotland Committing Suicide and Terminating the UK?

Opening Pandora's Box of Disintegration, the Balkanisation of Britain

The peoples of the United Kingdom are literally being sleep walked towards the edge of the cliff, most completely unaware of the potentially disastrous ramifications for not just Scotland but for what lies in store for the remainder of the United Kingdom following a Scottish Independence YES vote that would break start the process for ripping apart a 300 hundred year old entity of an United Island of Great Britain, which as I have repeatedly warned of during 2014 that a YES vote would literally sow the seeds for the balkanisation of Britain as this Island would literally tear it itself apart as the status quo of what had been taken for granted would no longer exist.

A whole host of news during the past year illustrate that the approaching Scottish Independence vote has already galvanised agitants right across the UK, for instance blowing on the embers for Cornish independence as they wave their aptly coloured Cornish black funeralesk flag that continues with calls of autonomy literally right at the other end of Britain from the Northern and Western Isles with calls for their own devolution from Edinburgh and even calls for their own parliament that sows the seeds not only for the balkanisation of Britain but also for breakup of an newly Independent Scotland that following a YES vote would soon start to disintegrate, as for instance the bordering regions would reassert their separate identity that has far more in common with the North England than much of Scotland, formerly known as the Kingdom of Northumbria that stretches from Edinburgh in the north all the way to the city of Sheffield in the south.

Whilst Alex Salmond, Scotland's Nigel Farage repeatedly plays the Scotland is rich because of North Sea oil card, what he convientely omits is that a significant portion of Scotland's oil reserves lie in the waters of the Northern Isles (Orkney and Shetland). Many people of the Northern Isles see themselves as having far more in common with Norway than Scotland which given the near immediate currency, financial and economic crisis that would follow independence would be fast pulled towards sharing sovereignty for far greater stability with the likes of Norway that could achieve what it could never have done militarily, namely expanding its borders and gaining many western north sea oil fields. Though in all probability the Northern Isles would probably eventually settle as becoming a protectorate of the United Kingdom along the lines of the Isle of Man.

So if Alex Salmond 'King of the Scots' does succeed in his tunnel vision mission for an Independant Scotland then he will likely go down in history as the first and last Prime Minister of Scotland as we know it today, which effectively means a Yes vote on 18th September will be Scotland voting to commit suicide as when the dust settles what remains would be a mere fraction of its current size.

Oil Price Crash and SNP Independent Scotland

Nothing illustrates the magnitude of the potential catastrophe that was the SNP's economic programme for an Independent Scotland (I.S.) than its reliance on an oil price well NORTH of $120 so as to turn Scotland into the promised land of milk and honey, the picture being painted was of an Independant Scotland (I.S.) of a paradise on earth, not that far removed from reality then that which the Syrian I.S. paints for the worlds gullible muslims that crave a fast track to paradise.

With every dip in the oil price SNP propaganda responded with the price drop being just temporary instead as we have seen a year on the economic collapse of an Independent Scotland would have been spectacular even worse then that of Bankrupt Greece. The SNP's Economic Baldrick-esk Master Plan for an Independent Scotland that was wholly based on reaping huge rewards from North Sea oil export tax revenues where SNP propaganda had convinced many Scots to Vote to effectively commit economic and social suicide by voting in last Septembers referendum that came close to achieving the catastrophe on the basis of propaganda implying upwards of £9 billion in North Sea oil tax revenues that would be raised to finance Scotland's budgetary black hole, which in the fever pitch of the campaign had reached the heights of £11 billion so as to exaggerate the degree to which Scotland could prosper and fill the void left by the withdrawal of the English subsidy that currently amounts to £9 billion per year.

Even the Governor of the Bank of England stepped in at the start of this year by warning "the Scottish economy was heading for a “negative shock”.

The problem with SNP economic propaganda is that it was based on a oil price being well NORTH of $100 per barrel, however a sub $50 oil price does not just mean that an Independent Scotland would have made half the forecast tax revenues i.e. £3.5 to £5 billion, instead the reality is that an Independant Scotland today would be forced to bear COSTS in support of a collapsing oil industry, just as the UK government has stepped in to support the Scottish oil industry to the tune of £1.5 billion. So an Independant Scotland would today have a negative cash flow from North Sea oil of about -£1.5 billion a year and it is this that illustrates the magnitude of the catastrophe that Scotland only just missed by a whisker if they had fallen for SNP nationalist propaganda.

Czar Putin and the Oil Price

Meanwhile the oil price collapse of 2015 has forced Czar Putin to reign his Ukraine and eastern europe military ambitions which all year have remained stuck in an holding pattern in Ukraine after last years land grab that few saw coming but which I warned of at the very start of what lay in store for the people of Ukraine.

24 Feb 2014 - Scottish Independence Economic Consequences for England, UK, Ukraine 2014, Britain 2016?

Just as an Independent Scotland, Russia requires an oil price north of about $110 to maintain its state finances and for every $1 below $110 Russia loses an estimated $2billion in revenue. With crude oil currently trading below $50 that's a a huge revenue loss of well over $120 billion per annum that has plunged the Russian economy into Recession with the economy looking set to contract by as much as 4% that is also bearing the sanctions consequences of the Ukraine war that is costing Russia at least 1% of GDP.

Whilst the ivory tower academics that permanently beat the drum of deflation, especially in the wake of the oil price collapse would be well served to take a look at what has happened to Russia where the inflation rate has soared to over 15% as a consequence of the loss of petro dollars that has seen the Russian Ruble grind lower to a 50% of loss of value against the dollar on a year ago.

So its no wonder that Czar Putin has pressed the pause button on the Ukraine war to probably wait until the oil price has recovered to $100, towards which Russia has little control over bringing about.

In fact the budgets of virtually every major oil producer require an oil price north of $60 just to break-even. With several such as Russia requiring a $100+ break even oil price and what is in large part sparking the economic migration of tens of thousands a month out of African oil producers such as Nigeria whose government requires an oil price of $120 to break even.

Oil Price Economic Stimulus

Whilst the producers / exporters are hurting the oil consumers / importers are experiencing a oil price bonanza as the price drop amounts to an effective transfer of wealth from oil producers to oil consumers to the tune of at least $1 TRILLION per year, a huge economic stimulus for the likes of the US, UK, Europe and every other major oil importer that has probably saved the Euro-zone economy from re-entering recession this year.

Oil Demand / Supply Fundamentals

China

However where China is concerned, its the other way around for the economic slowdown in China that has recently been felt in the global stock markets is actually a significant driver FOR the collapse in oil price. So whilst lower oil prices are supporting the Chinese economy, other drivers such as over capacity far surpass its stimulus that is likely to persist for the remainder of 2015 and into early 2016. So China does not look set to spark a fundamental turn around in crude oil demand this year at least.

Iran

The recent thawing in Iran / West relations implies the potential for an huge increase in the supply of oil out of Iran which has the worlds fourth largest oil reserves and second largest gas reserves. Whilst it may take as long as year for Iran to ramp up production of another 500k barrels a day. However a more immediate supply boost could come from the release of as much as 50 million barrels of oil in storage.

Saudi Arabia

Whilst there is no sign that the Saudi's are about to cut oil production in support of the oil price so that they are better able to finance their own large budget deficit which is estimated at $80 billion a year! However, against this the Saudi' have a $700 billion sovereign wealth fund to draw upon. In fact in strategic terms the Saudi's may well have played a part in engineering the drop in oil prices in response to market share being lost to the US shale oil industry and other non OPEC producers such as Russia so as to slowly but surely put many competing producers out of business who need a price of $60 just to break even such as Scotland's oil industry and many players in the U.S. shale oil industry who today are suffering and cutting back on production / exploration with many expected to go bust, especially those who have borrowed heavily when oil prices were high, but now are unable to service their debt mountains.

The U.S. shale oil production peaked this year at approx 5.7 million barrels per day and today has declined to 5.35 million barrels a day and is expected to continue to decline in response to a sustained low oil price. Therefore all the market commentators betting on Saudi Arabia to act to raise the oil price are going to be proven wrong, as Saudi Arabia is clearly playing the long game in very effectively dealing with competing producers.

So on the basis of fundamentals there is little sign for an end to low prices any time soon. Which means any bottom in the crude oil price is unlikely to spark a return to the likes of $100. More probably to stay stuck in a much lower range that this article will seek to determine the price levels of.

Crude Oil Price Forecast 2015

My oil price forecast for 2015 as a component of analysis of the US Dollar of 14th December 2014 expected the oil price to trend lower into Mid 2015, targeting a drop from the then approx $60 to a target low price of $36:

14 Dec 2014 - U.S. Dollar Collapse? USD Index Trend Forecast 2015

USD / Crude Oil Inverse Relationship Chart

Whilst it is beyond the scope of this analysis to conduct a forecast for crude oil prices, nevertheless crude oil is clearly in a STRONG downtrend / bear market with no sign of an end to this that ultimately targets previous multi-year lows along $36. Which implies that the over-riding trend should be towards lower oil prices before the crude oil price bottoms out. This therefore continues to suggest US Dollar strength for some time until such a basing pattern starts to materialise which conveniently coincides with my building view for the US Dollar strength into a mid 2015 peak.

The crude oil price subsequently did trend slower toward its mid year target of $36, by actually putting in a bottom a few days ago at $37.75 (WTIC). Which now implies that the oil price has bottomed. Therefore this analysis will seek to determine what comes next for the oil price for the remainder of 2015 and into at least mid 2016.

TECHNICAL ANALYSIS

TREND ANALYSIS - The last close of $48 represents a $10 rally on the last low of $37.75, whilst in percentage terms this is a huge 25% on the low. However in terms of trend has not changed much for the price chart clearly illustrates that the crude oil price is stuck within a trading range of between $60 and $40 with the most recent close of $48 virtually smack bang in the middle of this range and as the previous multi-year range suggest that the crude oil price could spend several YEARS stuck in this range.

SUPPORT AND RESISTANCE - Bear market bottom low lies in the zone $37 to $42. Whilst trading range resistance lies in the zone $60 to $64.

ELLIOTT WAVE ANALYSIS - The sept 2014 high of $112 was clearly a fifth wave peak that has subsequently ushered in a 5 wave decline to $37 which now implies an ABC correction higher towards $60 to $65. Though because we are in a trading range then this corrective rally is not going to be so simple as an ABC but resemble the messy pattern along the highs from 2011 to 2013 i.e. an ABC+ABC best describes what will probably pan out. Nevertheless EWT does suggest that the low is in, and that the immediate trend is higher towards $65. Which will probably be followed by another downtrend towards $42.

MACD - The MACD indicator is showing significant positive divergence to the oil price which is supportive of expectations for a trend higher. Overall the MACD is supportive of calmer price action ahead, namely a trading range.

SEASONAL ANALYSIS - The seasonal pattern is for the crude oil price to trend higher into October and down into early December. This supports expectations for the current rally to continue for another month or so to target $64 before reversing lower towards $40 and maybe a test of the $37.75 low before the end of this year.

US DOLLAR / OIL - It is often taken as granted that commodities tend to have an inverse relationship to the US Dollar by virtue of the fact that internationally commodities are priced in dollars i.e. a strong dollar cuts the price of a commodities in foreign currencies therefore this should, most of the time be reflected in the price charts of major commodities such as crude oil. In additional to dollar pricing, the crude oil price has literally collapsed that in times of economic uncertainty (falling oil demand) prompts both flight to safety, namely the worlds reserve currency and acts as a stimulus for the US Economy and thus the US Dollar as a consequence of falling energy costs.

The crude oil price has continued to exhibit a strong inverse relationship to the US Dollar apart from the most recent price action which shows crude oil price strength. My long standing forecast for the US Dollar is to marginally weaken into the end of this year from the current level of 96 towards 93.

14 Dec 2014 - U.S. Dollar Collapse? USD Index Trend Forecast 2015

A marginally weaker US Dollar should therefore be supportive of the crude oil price therefore implying a trend towards the upper end of its price range of around $64 as well as now probably holding the bottom of the trading range at $40 on any corrections.

Crude Oil Price Forecast 2015, 2016

Whilst it is highly probable that my original forecast low of $36 has now been achieved at $37.75. The over riding message from this analysis is that the crude oil price looks set to enter into a prolonged trading range of approx $64 to $40 for the next 12 months. Therefore my forecast conclusion is for crude oil to trend higher in the immediate future to the upper end of this trading range before turning lower and to remain within this trading range for another year. The range could also exhibit very short-term spikes to outside of this range i.e. to $70 and as low as $30, though I would expect downward price spikes to be far more probable than upward spikes above $64.

Oil Stocks

In terms of investing, with a sustained low oil price oscillating within a trading range for at least another year then this suggests that the oil sector is going to continue to contract with many players going bust due to unserviceable debt mountains built up during the boom years. Therefore it is going to be difficult to find the few golden nuggets that buck the trend amongst all of the junk so it is probably better to wait a year or so for the dust to settle then take a gamble today. However, if one does want to invest then accumulating positions at the bottom of the trading range is probably the best strategy.

As for oil price implications for the stock market then ensure you remain subscribed to my always free newsletter for my next in-depth analysis and concluding detailed trend forecasts that include the following planned newsletters -

  • Stocks Bull Market Over?
  • US Dollar Trend Forecast Update 2015
  • Islam 3.0

Also subscribe to our Youtube channel for notification of video releases and for our new series on the 'The Illusion of Democracy and Freedom', that seeks to answer questions such as 'Did God Create the Universe?' and how to 'Attain Freedom' as well as a stream of mega long term 'Future Trend Forecasts'.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2015 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive
Subscription

You're receiving this Email because you've registered with our website.

How to Subscribe

Click here to register and get our FREE Newsletter

To access the Newsletter archive this link

Forward a Message to Someone [FORWARD]

To update your preferences [PREFERENCES]

How to Unsubscribe - [UNSUBSCRIBE]

About: The Market Oracle Newsletter

The Market Oracle is a FREE Financial Markets Forecasting & Analysis Newsletter and online publication.
(c) 2005-2015 MarketOracle.co.uk (Market Oracle Ltd) - The Market Oracle asserts copyright on all articles authored by our editorial team. Any and all information provided within this newsletter is for general information purposes only and Market Oracle do not warrant the accuracy, timeliness or suitability of any information provided in this newsletter. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We recommend that independent professional advice is obtained before you make any investment or trading decisions. ( Market Oracle Ltd , Registered in England and Wales, Company no 6387055. Registered office: International House, 124 Cromwell Road, Kensington, London, SW7 4ET, UK )

Terms of Use | Privacy Policy

Copyright 2015 MarketOracle.co.uk

© 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