Peak Oil

[TV and credit cards]

Oil surging. Back to $38 from a low of $27 (WTI). Brent is at $41.
This is what I expected would happen months ago. I guess it took oil producers longer to get their shit together.

And the further it gets into the forties, the more US rigs you'll see coming on line. One thing these low prices taught US producers was how to maximize efficiency. I don't where the average is for US shale today, but it was the low fifties a year ago.
And there's still that pesky Iran issue. They're not going to play nice. They're going to pump and ship while the world lets them.
Further, look for cheating among those that do agree to caps. Which are pointless as the caps still exceed the world's demand. This little pop is totally unsupported. I see nothing but hopes and wishful thinking to support prices even in the forties.
Bottom line, the world is producing more than is needed and all that excess needs to be stored.
I'm calling this a dead cat bounce.

 

[Derec]

I'm calling this a dead cat bounce.

It's possible. But on the other hand, this has been going for over a year now and oil producers are feeling the pain. And not even Iran really wants to sell their oil for peanuts.

 

[semiopen]

Over a year after this thread was started, oil is starting to look interesting as a buy.

The chart shows a low of $27.56 a few days ago, which is sort of in line with the projections I mentioned above.

We would want to see a move above 38.39, if it penetrates the $27.56 low before this, "that would be bad" to quote Dr. Spengler in Ghostbusters.

USO is the main etf for crude oil, but that has issues with moving to appropriate futures contracts, that's an example of  Contango. XLE is the main energy sector stock etf. An interesting stock mentioned on Briefing.com is CFR - Cullen Frost Bankers, which has been moving with oil. It's up 10% or so in the last few days so I wouldn't jump in immediately. That advice applies to any of these.

As oil and the stock market are sort of moving together, it might pay to wait to see how that shakes out.

The Saudi/Mid East situation is interesting but it is difficult to come up with actual trading ideas from looking at that.

I meant to update this previously but I didn't get the impression that there was significant interest.



I decided not to do anything with oil based on price action after my last post. My theory was that it was going to do a head fake on the low. I think the crowd behavior theory is that the people that were buying the little bounce would put stops around the low (see my Dr. Spengler reference). Once that low was briefly penetrated on Feb 11, a buy was possible at 29.08 on February 16 but anytime in the next couple of days looked ok too. Somebody with balls might have bought the bullish head fake candle on Feb 11 but that was a tough call. That was Friday before a holiday weekend.

Anyway, oil specifically didn't really matter much as it has been correlated with the overall market recently and that's probably been a better place to be.

In the previous message I said

We would want to see a move above 38.39

actual spot prices are difficult, but it is hanging at that area now. I'd probably close positions here, 31% gain (without leverage) or so in less than a month, maybe look to buy in at an appropriate level on a pullback.

Actually the reason for my post is that the 18 day moving average has just crossed above the 54, and that same thing has happened with a lot of the equity indexes. I use 18 days as the short term average as opposed to the more usual 20 because 18 means life in Hebrew. Similarly, I use 54 as the long term average (instead of 50) because it is 3x18. Makes absolutely no fucking difference. Also the cross itself isn't particularly bullish. I just thought it was interesting.

I think the market is sort of looking to challenge the 200 day MA. The idea is that prices above this level suggests that the recent bear market is over, and that will influence trader behavior. Here, I watch the 52 week average price as a proxy, so I only look at this on weekly charts. I suspect there will be some kind of consolidation phase before that level is penetrated (or not).



Note that SPY has been hanging right below the 52 week average, but the TSI at the bottom is negative and both long and short term averages are still declining. I've been building long positions at lows but don't see any need to add to them here.