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
The Only Thing Systematic Is The Destruction Of America - 29th Sep 20
Fractional-Reserve Banking Is The Elephant In The Room - 29th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part I - 29th Sep 20
Stock Market Short-term Reversal - 29th Sep 20
How Trump co-opted the religious right and stacked the courts with conservatives - 29th Sep 20
Which RTX 3080 GPU to BUY and AVOID! Nvidia, Asus, MSI , Palit, Gigabyte, Zotac, MLCC vs POSCAPS - 29th Sep 20
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Crude Oil Forecast 2009- Time to Buy?

News_Letter / Crude Oil Dec 11, 2008 - 06:37 PM GMT

By: NewsLetter

News_Letter December 8th , 2008 Issue #42 Vol. 2

No one could have imagined a little over 4 months ago with crude oil trading at $147, that crude oil would have crashed by 70% and be threatening to break below $40 so soon. Therefore this analysis seeks to to evaluate the prospects for crude oils future trend over the next 12months in determining whether crude oil today is a good buy or not.


The Market Oracle Newsletter
December 8th , 2008            Issue #42 Vol. 2

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Best Analysis

Crude Oil Forecast 2009- Time to Buy?

No one could have imagined a little over 4 months ago with crude oil trading at $147, that crude oil would have crashed by 70% and be threatening to break below $40 so soon. Therefore this analysis seeks to to evaluate the prospects for crude oils future trend over the next 12months in determining whether crude oil today is a good buy or not.

Crude Oil Inflation Hedge Unwinding and the Recession.

China and other emerging markets are eyeing the fall in crude oil price to utilise huge trade surplus foreign currency reserves to buy up crude oil reserves exposure wherever possible, this has resulted in less of a decline for oil majors stock prices despite the 70% oil price crash. Crude oil as with all asset classes is being hit by the reversal of the inflation hedging that took place going into mid 2008 that saw crude oil bust through $100 towards $150, the original expectation was for the whole of this inflation hedging to unwind back through $100 and down towards a target of $80 with possible overshoot to the downside once the scale of the credit crisis fully manifested itself. As the oil price rally fed into much higher inflation statistics on the upside, so deleveraging of the inflation hedge is leading to self feeding deflation on the downside which is acting on pushing crude oils to much lower levels than could originally have been estimated.

The deep recession ensures that crude oil demand is being cut faster than that taken up by the emerging economic giants of China and India, also the stronger dollar has ensured that the actual falls in foreign currency terms has been less than for the United States. This implies continued weak trend for crude oil for the duration of the U.S. recession which is the key to crude oils trend for 2009, which given last months job losses of 533,000, the worst data in 34 years illustrates that the U.S. economy is a long way away from recovery with Europe not far behind in terms of economic contraction and therefore precludes a quick sustainable recovery for crude oil prices. However as always traders and investors need to concentrate on the actual price trend rather than the economic data as the price will move long before a change in the economic fundamentals becomes apparent.

Strike Against Iran Rumours

Still rumours persist of a possible attack against Iran's nuclear infrastructure that will drive crude oil prices higher, these rumours are nothing new for they tend to pop up every few months and have been doing the rounds for several years. This is more wishful thinking for perma oil bulls that last occurred in the lead up to the crude oil peak of $147 in July 2008, which at the time I concluded of being an extremely low probability event and which remains so. Those that have clung on to crude oil positions on the basis of this rumour have seen their bull market profits totally wiped out, therefore the key for any market participant remains to watch the oil price and not be mislead down the path of the wishful thinking rumour mill.

Crude Oil Supply / Demand Fundamentals

According to the International Energy Agency world oil demand growth is expected to slow to an average of 86.3 mln bpd during 2009 down from earlier forecasts that approached 87 miln bpd, meanwhile supply is expected to growing at an annual rate of 1.2% and expected to hit 87 mln bpd in 2009, which is less than the previous forecast for global supply growth of 1.6% per annum as the supply growth now reflects the 70% crash in the global oil price. However going forward demand from developed countries is expected to continue to contract at the average rate of 200,000 barrels per day that implies the full impact of peak oil will be put off for as long as another 5 years, implying crude oil volatility during this period where a future sentiment driven crude oil bull market could yet again lead to another price crash as we have witnessed over recent months. Therefore it is important for investors especially in oil price ETF funds to always have in place price targets and mechanisms for exiting out of positions so as to ensure future bull market gains do not evaporate in the face of bear markets.

Crude Oil Technical Analysis

Trend Analysis - Crude oil is clearly in the overshooting to the downside phase, having plunged through the original target of $80, then overshot support at $60, with the final break of the low of $50 and now assaulting on the $40 support level. Further immediate support exists along decades old resistance areas generated during the 1980's in the region of $35. Therefore this suggests further crude oil downside is limited. However the deep retracement suggests a wide trading band of between $80 and $35, therefore expectations of much price volatility during the base building process during much of 2009.

Therefore those now calling on crude oil to head towards $20 are reminiscent of calls for crude oil to hit $200 earlier this year, the overshoot that was going to occur has occurred with the expectations there there is little further downside remaining in future price action. However a bottom has to be formed that will take time to occur.

MACD - The MACD indicator is extremely oversold which implies that further immediate downside is extremely limited which suggests a significant multi month corrective rally is imminent.

Elliott Wave Theory - The peak of July 2007 marked the 5th wave Crude Oil Bull market peak with the subsequent expected pattern to form an ABC correction, that has been confirmed by preceding crude oil bear market outcomes. The current trend lower is clearly an A wave decline which suggests a B wave rally, that could retrace 38.2% of the decline today which projects to $80 and confirms trend analysis for a volatile crude oil trading range during 2009.

US Dollar bull market - The trend in crude oil and most commodities, is not so surprising in that the Dollar bull market remains in tact that will continue to bear down on all commodities during 2009. Previous updates: March 2008 - U.S. Dollar bottom called; August 2008 - U.S. Dollar base building breakout; October 2008 - U.S. Dollar correction into late November expected before continuation of the bull market into early 2009 towards a target of USD 92. More to follow on the U.S. dollar's prospects during 2009 in my fourth US Dollar bull market update later this month.

Crude Oil Forecast 2009

Crude oil is still in a downtrend, that means investors and traders need to WAIT for a buy trigger which normally means the break of a recent high or a significant resistance area ($50) before scaling into a position, and I mean scaling in because it will take much time for crude oil to formulate a bottom that I expect will form a very volatile double or even triple bottom pattern i.e. protracted bottom formation punctuated with very sharp short-covering rallies that could see crude oil spike higher to $80 and declines back to below $50 over the next 12 months as the below graph illustrates. What this anticipated scenario means is that there is TIME for investors to buy into crude oil positions as the base building confirmation takes place, as any strong rallies will likely be followed by tests and probable breaks of the previous low so as to enable the creation of the overall saucer shaped double bottom pattern.

However the long-term trend for crude oil remains higher, when I mean long-term I am looking at well beyond the next 12months towards 5 to 10 years, when I would not be surprised given the peak oil fundamentals that we will actually be visiting the $200 crude targets that were loudly pronounced during mid 2008 as being imminent when crude oil was trading at $147. This scene rios should not be surprising given that the US Dollar bull market remains in tact that will continue to bear down on all commodities during 2009, but more on the dollar in my next (fourth) US Dollar bull market update.

GOLD Quick Update - My previous analysis that envisioned a sideways trend for gold for 2009 of between $930 and $700 still stands with little price action to date to suggest otherwise.

Your PATIENT crude oil long-term exposure accumulating analyst.

Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 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 specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 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.

Attention Editors and Publishers! - You have permission to republish THIS article. Republished articles must include attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

For more in depth analysis on the financial markets make sure to visit the Market Oracle on a regular basis.

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

Forward a Message to Someone [FORWARD]

To update your preferences and access the Newsletter archive [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) 2005-2008 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: 226 Darnall Road, Sheffield S9 5AN , UK )

Terms of Use | Privacy Policy

Copyright 2008 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