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Palantir
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Bullish Price Mechanics for Oil
Energy investors have had a very profitable few months. Oil prices have been on a sharp incline recently. How high can the price of oil go? Nobody knows for sure, but there are a few factors you can watch out for.
Laws of Demand
What causes oil prices to move? The laws of supply and demand dictate oil prices. It sounds simple, but with all of the geopolitical issues around the world, oil prices can be quite volatile and hard to predict.
In theory, an increased demand for oil will increase the price of oil.Also, a decrease in demand will decrease the price of oil.
If the economy is growing, then usually, the demand for oil is increasing. When an economy is contracting, then the demand for oil will contract as well.
If and when there is a recession, demand for oil will plummet, and oil prices will drop with most other asset prices.
The US economy continues to show resilience. And so far, consumers are not slowing down their consumption of oil no matter what the price is.
If and when the chinese economy starts to improve, then the demand for oil will increase alongside the chinese economy.
Laws of Supply
A deficit in the supply of oilwill push up the price of oil, in theory. A supply surplus will bring down the price of oil.
Lower oil inventories, or stockpiles, equates to a lower supply of oil. Crude oil inventories have been falling for the past three weeks, which could be proping up oil prices. Thankfully, gasoline production is on the rise. So we might not see gas prices climb with crude.
Probably the biggest factor that affects the price of oil is Opec+. When Opec+ decreases their production of oil, then the supply of oil decreases.
The oil producing countries that make up Opec obviously like the high oil prices. They have recently made major cuts to their oil production. I think this is the biggest reason for the recent rally in oil.
Government sanctions artificialy decrease the supply of oil. The US has sanctions on some of the major oil producers around the world, like Venezuela, Russia, Iraq, and Iran. Their are also sanctions on many other countries in Africa, the Middle East, and Eastern Europe. Their are even sanctions on several oil companies in Hong Kong. All of this will support the high price of oil.
Extreme weather events, like hurricanes, can affect the supply of oil as well. We are nearing the peak of hurricane season. If the Gulf of Mexico experiences a bad hurricane season, then it could affect the price of oil.
Technological Advancements
Improvements in technology within the energy industry can affect the long-term trajectory of oil prices. The right technology can increase the supply and/or decrease the demand. This would bring down oil prices. Technological advancements happen over long periods of time, so I wouldn't count on technology to bring down oil prices in the short term.
Crude Oil Future's Technical Outlook
Last week, we saw a big breakout as oil prices moved above a strong resistance level derived from previous highs and a long-term Fibonacci level. This is a bullish development.
The more short-term subindicators are showing signs of overbought conditions. But MACD is about to confirm a bullish cross in the Moving Average Cost Difference. This could indicate that a short-term correction could be in the works. After a strong rally like last week, there might be a lot of short-term investors ready to take some profit.
The 4-hour candles formed a head and shoulders topping pattern over the past several weeks. This potentialy bearish pattern was formed near the strong resistance levels mentioned earlier. Any short positions built on this candlestick pattern were likely squeezed out. This could have contributed to the bullish momentum last week.
Futures contracts with far dated expiration were all climbing all week with a large net increase in positions. Typically, the near-term contracts get most of the price movement. Broader bullishness like this is a good sign.
Crude prices have climbed over 9% in the past 7 trading days. In the past two months, crude is up almost 30%. The technical picture is starting to look better and better over the past few months.
This is what a rally looks like. After last weeks strength, it appears that this rally has more steam. But as for how much steam, nobody can be exactly sure.
Whether or not this rally has more steam, I will be watching the major technical levels for possible support or resistance. I have highlighted these price points below.
There are a lot of weak support/resistance levels between the $83.00 and $89.00 price points. I would have expected a lot of choppy price action in this area, but so far, crude's price is blasting through this area.
Conclusion
Personally, I am not super bullish on oil. I never have been,to be honest. But crude futures are looking very bullish lately.
The supply and demand picture for oil appears to be dovish for oil prices. I don't see any reason oil prices should see any significant downside until the geopolitical situation changes or improves.
The technical picture for oil has been looking quite bullish over the past couple of months. For the very short-term outlook, a little selling would be healthy for this rally to cool off before overheating.
If the selling starts off the week next week, then I have highlighted the first area I would be watching for a rebound.
I should mention that oil prices are strongly tied to inflation. If oil prices climb high enough, then the price of goods and services will rise as well. This could possibly affect the Fed's interest rate decisions, which will affect equity markets.
Over the past couple of years and several instances in the past, interest rate hikes have been bad for the stock market. So, you could say that oil prices indirectly affect the equities in a sense.
I wouldn't expect any major developments in oil futures, at least until we hear from Opec. The next Opec monthly report is released on the 12th of September. The next Opec+ meeting falls on October 4th. On these dates, it is possible that we will get more insight into Opec's future oil demand outlook and production quotas.
Personally, I like to trade options, but those can be very risky. If you want to gain some leverage in the energy sector without options, then check out these leveraged ETFs for different industries within the energy sector. You can gain profit from the ups and the downs in the energy sector. $ProShares Ultra Energy (DIG.US)$ $Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH.US)$ $Direxion Daily Energy Bull 2X Shares ETF (ERX.US)$ $MICROSECTORS OIL & GAS EXP. & PROD. 3X LEVERAGED ETN (OILU.US)$ $NRGU MicroSectors US Big Oil Index 3X Leveraged ETN (NRGU.US)$
Do you think crude prices will reach the $130.00 price point again? This is the price that oil climbed to following the Russian war and worldwide supply chain issues.
As always, this is not investment advice. Good luck trading. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Give your investments time. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. And just follow the trends. A trend is your friend.
$Chevron (CVX.US)$ $Phillips 66 (PSX.US)$ $Valero Energy (VLO.US)$ $Devon Energy (DVN.US)$ $Occidental Petroleum (OXY.US)$ $W&T Offshore (WTI.US)$ $United States Oil Fund LP (USO.US)$ $United Sts Brent Oil Fd Lp Unit (BNO.US)$ $Imperial Petroleum (IMPP.US)$ $Houston American Energy (HUSA.US)$ $Indonesia Energy (INDO.US)$ $BP PLC (BP.US)$ $Exxon Mobil (XOM.US)$
$Invesco QQQ Trust (QQQ.US)$ $iShares Russell 2000 ETF (IWM.US)$ $VIX Index Futures(MAR5) (VXmain.US)$ $SPDR S&P 500 ETF (SPY.US)$ $SPDR Dow Jones Industrial Average Trust (DIA.US)$ $Gold Futures(APR5) (GCmain.US)$ $E-mini Dow Futures(MAR5) (YMmain.US)$ $E-mini S&P 500 Futures(MAR5) (ESmain.US)$ $E-mini NASDAQ 100 Futures(MAR5) (NQmain.US)$ $E-mini S&P MidCap 400 Futures(MAR5) (EMDmain.US)$ $E-mini Russell 2000 Index Futures(MAR5) (RTYmain.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $VIX Index Futures(MAR5) (VXmain.US)$
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Trump 2.0 Era: How will global markets evolve?
🎙️Discussion: 1. How will tariff policies affect the movement of key assets such as U.S. stocks, gold, and Bitcoin? 2. Given this context,
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102640653 : Any updates on hongkong market
SpyderCall OP 102640653 : let me check
102640653 : Thanks
razo2 : oil had hit highest this year. worse to come the next following months as OPEC+, Saudi and Russia continue to cut supply. we had reached COVID low for oil exports.
people fail to understand that oil is not only made with just crude. you need to blend crude with brent in ratios to create the maximum yield of the lighter end of oil. if you do your home work most of the OPEC+ control the world brent.
if you refine oil from just pure crude oil, the refinery will be choked with sulphur and will not yield as much light end oil. the cost to refine will shoot up to the moon.
SpyderCall OP razo2 : I've never seen that chart. I didn't know we were at covid lows. yikes... And who is that guy in the suit and tie? That last picture has gotta be photo shopped, right?
razo2 SpyderCall OP : not too sure who is the guy in the tie, but surely know the habibi beside him. I just see the charts and likely possible outcome for oil since I work on this sector. we are still going strong but based on recent Q meeting. we are expecting a huge down turn in 2024. that explains why oil is cutting supply to that levels, we don't want to get caught off guard like 2015/2016 where water is more expensive than oil.
we will know soon as OPEC+ will announce cut soon.
SpyderCall OP razo2 : I've heard some analysts say that Opec was cutting in anticipation of decreased demand. That makes sense.
The lag effects of the interest rate hikes supposedly hit roughly 18 months after the initial hike.
Commercial real estate is already feeling it.
Consumer credit is already feeling it.
Lower income consumer oriented businesses are feeling the pain also.
What am I leaving out?
This boom and bust cycle happens over and over. The questions I'm wondering about are, will they print money this time? I think they will. And if so, how much?
To service US debt obligations, they will need to print a lot lot lot of money. And then there is that inflation thing. The bust cycle really needs to bring down inflation, or the printing machine will just bring inflation higher