Year end thoughts on Oil.
The year is ending with a lot of question marks and even more guess's as to what will happen. The price has obviously been in a steady down trend since its peak early this year with the Ukraine/Russian war. The threat of recession due to the governments battle with inflation and the perception of demand decline has been hitting the price right in the teeth it seems as the news keeps its negative narrative. The question really is is this warranted? What are the technical indicators telling us? What do the historical historical fundamental stories have to say?
First lets tackle the fundamentals:
--Demand for Oil/fossil fuels is not in decline, the consumption growth slows slightly in past recessions, but it does not decline. Consumption of fossil fuels goes up every year and 2023 should be no different.
--Supply is tightening. Reserves are shrinking. And Producers are choosing to pay large dividends instead of reinvest into more exploration and development. So even if demand does shrink (which it should not for the next decade) the price will be propped up by lack of supply. Scarcity matters.
--Politics Matter. The early 21st century represented a relatively peaceful time in human history marked by economic growth due to globalization. However not everyone in the world plays by the same rule book when it comes to Power. There is still a huge discrepancy when it comes to sensitive topics involving human rights, religious freedoms, democratic process, and power. I feel we are entering a phase of increased tension ( if the war isn't obvious enough ) and this will prop the price of Oil up for some time.
What about the Charts??
-- Well in the short term charts, WTI has recently managed to push through a couple of minor resistance points. Now hovering around $80 to end the year. (with a week to go) In my opinion there is an important resistance zone between $81.40 and $83.50. If the negative world politics and supply issues move to the front of the line, and price manages to push past this zone, we may see a run back up into the mid 90's. I do expect this to happen eventually, but not without a couple of failed tests first and the usual market volatility we've seen with $4-$8 weekly swings in price based on news releases. My guess is we see the price pop back to the $94 range before the end of Q2. But take it all with a grain of salt... Its just my guess.. :)
-- Time for cheesy disclaimer -- Invest at your own risk -- this is just my opinion and year end thoughts on the price of Oil -- not advice --
First lets tackle the fundamentals:
--Demand for Oil/fossil fuels is not in decline, the consumption growth slows slightly in past recessions, but it does not decline. Consumption of fossil fuels goes up every year and 2023 should be no different.
--Supply is tightening. Reserves are shrinking. And Producers are choosing to pay large dividends instead of reinvest into more exploration and development. So even if demand does shrink (which it should not for the next decade) the price will be propped up by lack of supply. Scarcity matters.
--Politics Matter. The early 21st century represented a relatively peaceful time in human history marked by economic growth due to globalization. However not everyone in the world plays by the same rule book when it comes to Power. There is still a huge discrepancy when it comes to sensitive topics involving human rights, religious freedoms, democratic process, and power. I feel we are entering a phase of increased tension ( if the war isn't obvious enough ) and this will prop the price of Oil up for some time.
What about the Charts??
-- Well in the short term charts, WTI has recently managed to push through a couple of minor resistance points. Now hovering around $80 to end the year. (with a week to go) In my opinion there is an important resistance zone between $81.40 and $83.50. If the negative world politics and supply issues move to the front of the line, and price manages to push past this zone, we may see a run back up into the mid 90's. I do expect this to happen eventually, but not without a couple of failed tests first and the usual market volatility we've seen with $4-$8 weekly swings in price based on news releases. My guess is we see the price pop back to the $94 range before the end of Q2. But take it all with a grain of salt... Its just my guess.. :)
-- Time for cheesy disclaimer -- Invest at your own risk -- this is just my opinion and year end thoughts on the price of Oil -- not advice --
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