2022/11/21 (115) Technical Analysis

Oil Price Broke Down, But Recovery Possible Anytime
– But We Stay Short With Our Short UKOIL Trading Capability

Alleged Increase In Production – Oil Price Under Pressure At The Start Of The Week

According to Bloomberg, shortly before the EU sanctions against Russia began, there was a report that OPEC+ could expand its production. Which could be the reason for the price pressure earlier in the week. There was a real slide from $4 to $5 for the day. Like many other writing colleagues, I suspect the reason is current rumors about a possible expansion of oil production. More oil on the world market naturally depresses the price of oil. And as usual, this scenario is immediately anticipated on the futures market.

Also according to the Bloomberg internet site i read today, “Saudi Arabia and other OPEC countries could reportedly discuss increasing production as China tightens its coronavirus restrictions, hurting demand prospects.” The Wall Street Journal also wrote „that “OPEC+ (OPEC and external partners) may consider increasing production by 500,000 barrels per day ahead of the EU embargo on Russian oil.” If these expectations get confirmed, the increase in production would come at a time when market sentiment has changed, physical barrel prices are falling and the US prompt spread is in contango. China saw its first Covid-related death in almost six months over the weekend, and residents in a city of 11 million near Beijing were urged to stay home due to an outbreak of the disease, raising fears of another wave of restrictions in China. Goldman Sachs cut its fourth-quarter forecast for Brent crude oil by $10 to $100 a barrel, a note shows, with the cut reflecting in part the possibility of further action to tackle the virus in China as the cases are increasing.

All In All This Does Not Bode Well For A Further Rise In Oil Prices

That`s why we should consistently maintain our short UKOIL trading capability from USD 95 (with a stop price of USD 100). And that although I still want to argue differently as far as the headlines of the last few days are concerned. Namely in the case of China, as far as the price of oil is concerned. Since most colleagues, in their newspapers, and/or analyst firms, expect a falling oil price due to a lack of demand from China. Which I don’t disagree with, as you know if you read my D2D Affialte Financial Market Online Newspaper regularly. But I think that because of Russia’s war of aggression against Ukraine, the price of oil shot up above USD 100. And or rather the US economic policy, especially energy policy, of the US Democrats, under the watch of Joe Biden, in the White House. Because in January 2021, US inflation was more or less 2% and the oil price was USD 40. And that is the main driver, the driving force – if I am not mistaken in my detailed, clear synthesis – the crucial point. Because the US inflation rate has been on the way back for 5 months – since June 2022 at 9.1%. The annual inflation rate in the US slowed for a 4th month to 7.7% in October, the lowest since January, and below forecasts of 8%. It compares with 8.2% in September. Energy cost increased 17.6%, below 19.8% in September, due to gasoline (17.5% vs 18.2%) and electricity (14.1% vs 15.5%). And since I no longer expect US inflation to rise, we should maintain our short UKOIL 4XSetUps trading capability. And that too when the oil price rises/falls by USD 5 on individual days – perhaps because of the headlines that many other colleagues have just formulated. And or maybe also because of my assumptions. Anyway? Follow me on Twitter @D2D_HelpfulTool to stay up-to-date on the oil price to the best of your knowledge and belief.

For The Past Few Months I Have Taken The View That The Oil Price Should Tend To Fall Below $90 Rather Than Trade Back Above $100

Nonetheless, I still expect the oil price to stay mostly in the $90 & $100 channel as upside resistance is coupled with downside support. Upside resistance stems from weakening and fragile economic conditions, most notably in Europe – and this is due to Russia’s war of aggression in Ukraine. So that, if you like, my readers, in a warlike environment, the domestic demand for oil in the individual states lags behind, and the price tends to stay up, precisely because of the risk of warof course. But that should be more than priced in at over USD 100, as already argued. So that support for bulls in oil prices should only come from relatively tight oil supply conditions!? Imagine what will happen to the price of oil as the war in eastern Ukraine nears its end? And or also the US inflation comes down? Right! The price of oil should get cheaper – despite the demand from China! And that’s what this short UKOIL 4XSetUps trading capability aims for. And then also for the year 2023. So just don’t lose your patience. And consistently comply with previously defined entry and exit prices. And that regardless of the uncertainty about security of supply, for us in the so-called West. As the US and its G7 allies continue to consider implementing the imposition of additional sanctions. However, I still believe that the additional sanctions (including a price cap) will be of limited effectiveness for the oil price action. Because the other factors, in particular Russia’s war of aggression against Ukraine and/or US inflation, are the two most important influencing factors for oil price developments.
May be that`s why John E. Paisie, founder & owner & president of Stratas Advisors, probably noted in his weekly outlook the following concluding words. And that also the COP 27 being held in Egypt ended on Sunday don`t has any directly affect on the oil price action developments:
There is also no commitment to phase out fossil fuels with the nations agreeing only to accelerating efforts to phase out unabated coal power and inefficient fuel subsidies
Some participants have expressed a concern about the potential of using low-emissions energy, such as natural gas, which would still contribute to the emissions of CO2 and methane

However, The Oil Price Action Drops To A 8 Week Low While Monday Trading Session

Brent crude futures fell more than 5% to $83 per barrel on Monday, the lowest in wight weeks, after The Wall Street Journal reported that Saudi Arabia and other OPEC producers are discussing an increase in crude production. The report suggested that an increase of up to 500,000 barrels per day is under discussion for OPEC+’s December 4th meeting. The increase would come after last month’s decision to cut production by 2 million bpd, and ahead of an EU ban on Russian crude imports from December 5th and a G7 price cap on Russian crude. Oil prices have been falling for the past four sessions, amid demand concerns from tighter Covid curbs in China and fears that major central banks will continue raising interest rates. China reported its first Covid-related deaths in almost six months over the weekend, while localized lockdowns were implemented in some areas on Monday as the world’s top crude importer continued to grapple with resurgent Covid outbreaks.