Critically Crude

The cross-winds are swirling in respect of the Oil price, as confusion reigns.

In the words of a typical economist, “on the one hand,” OPEC appear likely to renew their recent production cuts, in particular from Saudi Arabia and Russia who are desperate for higher prices, whilst “on the other hand” is the new swing producer, the United States, who are equally keen to ramp up the shale production, if for nothing more than to alleviate the debt and job-losses seen within that sector.

So what’s an Investor or end-user to do?

At its simplest ignore the chit-chat, views (economist or otherwise) and even the fundamentals, as they are speculation at best and guest-work at worse.

We set out within our “Oil Price Collapse….Why the Surprise” just why we like charts, because they never lie, whereas fundamental analysis, although useful, is open to conjecture and extrapolation of the past into the future, with the overview going on to demonstrate how our charts gave ample warning before the Oil price slump.

So what of these cross-winds?

First up we show a chart of the long-term price of West Texas Light Crude, monthly data points since 1997:

Aside of it reminding just how severe was the 2008 price crash, note the black-dashed-line, as it’s very important. It’s effectively a support-line, which gave way last year and is now under threat once again.

This uncertainty was evident within our 5-year weekly data chart below, which provides colour- coded signals indicating Buy /higher Oil price (green), Neutral/uncertain (neutral) or Sell/lower Oil price (pink), which are supported by other technical observations  not shown here:

As can be seen, the dip below the aforementioned $30 black-dashed-line of early 2016, was flagged as a sell but quickly turned to neutral, which suggested a false-alarm. Also note, the most recent colour-coded signals have repeated this.

Adding to the mix is the $US Index, which of course is Oil’s currency, and in itself is throwing up shorter-term cross currents:

By inverting the Dollar index (turning it upside down) shows the negative-correlation between these two asset classes of the past few years, albeit that the relationship is breaking down of late.

Fortunately for investors or for those within industry sectors who need to make decisions based on currency moves and/or the price of Oil, we provide a very cost-effective service, which can be accessed via Here OR Here

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