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

Oil heading towards that target

The Russian invasion Ukraine has proved to be the peak in WTI Crude Oil prices.

Fairly, I’ll say for now or at least for 2022.

The long mean reversion story (being the 200 week moving average) remains valid and intact.

Oil prices remain in a downtrend from their more recent high of $122 and continued to make lower highs and lower lows.

Somewhere close to $65 is where it should take a rest and I’ll watch if the tide takes it to $52-$54.

December 6, 2022

by Rob Zdravevski

rob@karriasset.com.au

Oil & Gas rigs are still climbing

Globally, we may be 6 months away from reaching the same oil rig count as seen in March 2020, for the number of rigs in action tend to decline through November – February.

The lag in deployed rigs appears in the Middle East, Africa and ESG ‘shamed’ Europe.

I don’t know why Biden is so angry at his American Oil & Gas E&P companies, for their rig count is nearly back to where they once came from.

I think that threat of his to impose a super tax of their ‘super’ profits was a mid-term election rhetorical ploy.

November 10, 2022

by Rob Zdravevski

rob@karriasset.com.au

The energy dominos are falling one by one

Now that RBOB Gasoline, Natural Gas, Dutch TTF Gas and the JKM LNG Marker prices have halved, I think other commodities in the energy complex are at a critical juncture.

While I remain cautious and specifically bearish on crude oil prices (I expect WTI Crude to move towards $65-$68 from its current $84.50), the larger declines could be seen in Heating Oil and Diesel (Gasoil).

They are currently trading at $3.95 and $10.82 respectively.

Both Heating Oil and Gasoil remain in downtrends across various timeframes and now I am watching a few more indicators to confirm strength and the next leg downwards.

If so, there could be 40% further downside in Heating Oil and Gasoil.

This view all seems quite perverse as the Northern Hemisphere winter approaches.

p.s. the largest use of diesel is in transportation, not electricity generators

I’ll write when/if the probability of this increases.

October 25, 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

It always remains about Oil

Did anyone find the irony and hypocrisy in the Biden Administrations disapproval over OPEC+’s decision to cut oil production quotas at their recent meeting?

President Biden et al. aren’t thrilled with the decisions, which should invariably send oil prices higher.

It did.

WTI Crude and Brent Crude rose 16.5% and 15% for the week, respectively.

So, does Biden actually want OPEC+ to pump, produce and export more oil?

But isn’t this against his climate policy?

Well, this is another hypocrisy of his.

It’s not a question about why he is releasing so much oil from the U.S. Special Petroleum Reserve. That answer is to win votes this November 2022.

But it inevitable that when more Oil is released, then more Oil is burned and used.

And this story goes round and round and round.

It’s relevant to identify the price-taker and who is the price-maker.

October 9, 2022

by Rob Zdravevski

rob@karriasset.com.au

Drill Rig count rises

The monthly Worldwide Rig Count is out from Baker Hughes

FYI, this data is a monthly census of “active” drilling rigs exploring for or developing oil or natural gas.

A modest global increase of 1.5% was seen from the previous month.

In the attached PDF I encourage readers to look at which regions are closing in on a similar amount of rigs ‘in action’ as see in February 2020. Some are nearly there.

It’s quite telling though.

The Europeans are lagging as they are curtailed by ESG influences.

Latin America needs petro-dollars more desperately than others.

The Middle East can refrain drilling in order to will higher prices.

While the USA is a hair away from their February 2020 levels, driven by political rhetoric of oil independence and a government customer needing to replenish their dwindling Strategic Petroleum Reserve.

Needless to say or see, the number of Oil and Natural Gas drilling rigs being put to work isn’t in a declining trend.

October 9, 2022

by Rob Zdravevski

rob@karriasset.com.au

Following a $10 bounce, Oil is now a marginal trade

Further to today’s note about Oil, OPEC and Oversold break-even inflation rates…….

This note told you,

…..when Oil hit my long-standing lower target of $77.50 (trading to $76.25 intra-day).

That was 7 trading sessions ago and it coincided within the Oversold weekly reading for the 5 year break-even inflation rate.

Oil has bounced $10 since then.

Today, Oil has a short term upward trend developing,

but its only a trend.

At $87, it’s in no-mans land.

It could go $13 up or $13 down.

With new money, it’s a marginal trade or position to take.

Following a couple weeks of trade, I’m betting that WTI Crude sees $74 before it sees $100.

October 6, 2022

by Rob Zdravevski

rob@karriasset.com.au

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