My Oil pessimism is leading to a buy opportunity

My call of WTI Crude Oil visiting $65 still stands.

So, WTI Crude has fallen $9 in the past 2 days.

Now, it’s trading at $73.70

But that’s just reporting the news.

Depending on the strength of the downtrend, the next stop below is ~$62 and failing that, then we may see $54.

(technical trending analysis hint: watch the ADX on the DMI)

Back when Oil was surging to $120, my writings were warning readers to not chase prices higher especially following parabolic price moves and the gravitational pull of long, long term moving averages.

To boot, the price of Oil tracks GDP, it is a large component of inflation readings….and I think that the WTI Oil price leads interest rates.

Keep in mind, that the U.S. 10 yer bond yield was recently 4.33% and now its 3.71%.

To wit, the 10 year bond yield could see 3.30%, if not 2.5% in several months, to latently mimic the Oil price.

So, I say, many had no business buying Oil at $115 nor betting that GDP will expand and the near halving of its price from those highs should be recognised as assisting the moderation of near-term inflation.

While I think $65 is possible, it’s not a time to ‘short’ Oil as such a bet is marginal. Oil may fall $10 or rise $10. Ho hum !!

The fat part of the short trade has been seen.

The preparation is for a low in Oil and then how that relates to other assets and securities.

January 5, 2023

by Rob Zdravevski

rob@karriasset.com.au

AUD/JPY lows help with Oil entry prices

The study below shows WTI Crude Oil making a notable low approximately 6 weeks after the AUD/JPY first enters weekly oversold territory. 

Correlating the technicals in other assets helps me determine what I think may be a safer entry point, rather than relying solely on Oil price data.

Another example of this appeared in a recent post which monitors the Gold/Oil Ratio.

For now, I’d like to see WTI Crude trade down to the $65 mark.

December 21, 2022

by Rob Zdravevski

rob@karriasset.com.au

Oil – Buy signal approaching

Under the guise of getting the bigger calls right and continuing from the previous post…….

and for something acutely related to the Gold/Oil ratio…..

when we find the Gold/Oil ratio at overbought levels on a weekly basis, this suggests that the price of WTI Crude Oil is in buying territory.

We are potentially approaching the 14th time (over the past 30 years) that this buying signal will occur.

Keep in mind, I’m talking about the price of Oil.

Logically, oil related equities should also prosper and have the ability to deliver operational leverage, however you’d need to do the research on any specific companies numbers such as their debt, interest expenses, free cash flows, contracted or forward delivery prices etc etc.

December 15, 2022

by Rob Zdravevski

rob@karriasset.com.au

Energy stocks correlations

The next directional move in Woodside shares hinge on the direction in and or a combination of the Japan/Korea LNG Marker, the U.S. Natural Gas price, the West Texas Intermediate (WTI) Crude Oil prices along with the AUD/USD.

The charts below show the various correlations between Woodside shares and those assets.

My analysis of Woodside shares suggests that has a further 15% downside risk to $28, which is where I will be a buyer.

I may perform this exercise across other energy related equities.

JKM LNG Marker (in blue) versus Woodside

Henry Hub Natural Gas (in blue) versus Woodside

WTI Crude Oil (in blue) versus Woodside 

AUD/USD (in blue) versus Woodside 

October 19, 2022

by Rob Zdravevski

rob@karriasset.com.au

American inflation rates tells OPEC when to cut production

Here is a lovely chart showing the price of WTI Crude and U.S. 5 year break-even inflation rate.

To which about the latter, the St. Louis Fed says, ‘the value implies what market participants expect inflation to be in the next 5 years, on average.’

They dance wonderfully together.

The better part of the chart is the lower bit where the RSI (Overbought/Oversold) indicator appears.

Whenever the 5 year breakeven inflation rate is Oversold (as this weekly chart shows), the WTI Crude Oil price finds a floor from which to advance.

We saw an Oversold 5 year b/e rate last week.

This week’s OPEC production cut announcement wasn’t a surprise because this Oversold moment tends to coincide with when OPEC announces production cuts.

Of course, Biden isn’t happy that OPEC have cut production.

Also, he has virtually spent all of the nation’s Special Petroleum Reserves in thinking it was him sending Gasoline prices lower, when it was in fact a combination of other falling commodity prices (which is deflationary), mean reversion in the oil price and rising credit forces at work.

No to mention the importance of Biden needing lower domestic petroleum prices to aide his mid-term election hopes.

OPEC’s production cut may seem to be mathematically synchronised to the United State’s own inflation break-even rates but I think it is equally loaded with a little political payback.

Funnily, the U.S. isn’t pleased with this announcement and have passed on their viewsbut you can’t have a say in a club to which you are not a member of.

Keep in mind, this doesn’t show you when to sell your Oil.

Those are other indicators.

October 6, 2022

by Rob Zdravevski

rob@karriasset.com.au

Crude Oil and AUD/USD watch

3 days ago, I wrote that Oil needed a quick drop of ‘$2 or $3’ in order to extend some strength in oil’s current downtrend.

WTI Crude fell $4.75 on Friday, closing its trading week at $78.74

Equally, the AUD/USD exhibited expected weakness during Friday’s session. It closed at 0.6531.

So, I’ll watch for how the AUD/USD and WTI Crude symbiotically test their next respective levels of 0.6464 and $77.50, as neither ‘daily’ downtrends are confirming continuing strength.

Hint: probability is rising that we are at the tail-end (+/- 3%-6%) of the downdraft in both assets.

September 24, 2022

by Rob Zdravevski

rob@karriasset.com.au

31% decline is losing some steam

Here are some WTI Crude Oil trend lines I’m watching.

The downward trend remains intact, however on a daily basis it’ll need a quick drop of $2-$3 in order to add some strength to this trend, otherwise we can kiss a visit to $77.50 and any notion of ~ $65 good bye for the time being.

Should this trend wane, it will correspond with the AUD/USD and the CRB Index finding a floor.

September 20, 2022

by Rob Zdravevski

rob@karriasset.com.au

Watching Currencies – AUD/JPY and Crude Oil

Correlations – AUD/JPY and Crude Oil

September 5, 2022
by Rob Zdravevski
rob@karriasset.com.au

Oh the hypocrisy!

The United States receives 8% of its Crude Oil imports from Russia.

(on another note, 2% of its oil imports come from Iraq and a further 1% from Libya)

The U.S. have announced a release of 30 million barrels from their Strategic Petroleum Reserves.

Various news reports carry the sub-text that the release will assist to ‘end the weaponisation of Russia oil’.

The United States import 30 million barrels of oil from Russia ALONE every 2 months.

In fact, the Biden administration is on a run rate (so far) of importing more Russian than during the Trump years.

Don’t let the headlines and spin mislead you.

#context

March 3, 2022
by Rob Zdravevski
rob@karriasset.com.au

Oil about to hit a 3 1/2 year high

It’s an important coming day or two in Brent Crude Oil trading.

I’m watching if it trades above $86.68.

Friday’s high was $86.52.

That means it makes a ‘higher high’ seen on October 25, 2021.

Albeit, a ‘higher high’ while also recent making a ‘lower low’ portends for an extension of the current rally, on a Daily basis, Brent is now in Overbought territory and 2 standard deviations above its mean.

Whilst the chart below is current, it has notes on it from a post on November 5th, 2021, which also shows the previous high in Brent at $86.71 from October 3, 2018.

January 17, 2021

by Rob Zdravevski

rob@karriasset.com.au

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