Oil markets have been in free fall for some time in the marketplace, and many have noticed. From traders to retail spenders at the pump everyone has noticed the value of oil dropping strongly, and for the most part many have been happy. But oil may be set for a turning point in the near term and I feel strongly that the market is anticipating a big move sooner rather than later.
Source: Bloomberg (Crude Oil, Commodity Curve Analysis)
A quick look at the most recent commodity curve is very interesting and shows a bullish uptrend in the market place. This might be surprising for some, but oil prices have fallen so far now that OPEC is poised to take action, and American shale oil comes under threat when you have oil below 80 dollars a barrel.
Source: Bloomberg (China, Oil Consumption)
There has also been a lot of talk around China slowing down and this affecting oil consumption in the long run. So far China is still expected to grow at around 6% y/y over the course of the next 5 years and this will further add to oil consumption for the world’s second largest economy. So for people saying the demand will slacken – sure that might be the case, but in the long run it’s likely to keep on rising for some time yet.
Source: Blackwell Global (Oil, D1)
Now the chart is where it gets the most interesting for oil. Currently we have seen strong pressure on oil, followed by even stronger pressure as oil shifts downwards in tight channels. This has been led in part by lower lows and lower highs. However, we’ve seen oil start to slow down in terms of aggressive waves. This does not mean it will stop though, as the market is non-volatile and trending lower as we speak.
Source: Blackwell Global (Oil, M1)
The long term chart is the most interesting with oil currently sitting above the heavy support level at 74.72. A crash through here on the long term could send it tumbling towards 70.18 where I feel that markets would look to make a solid stand here, as liquidity has been very strong in this area
For the most part, the oil markets are nearing a key point and the support levels are looking very strong. The futures curve, which was once bearish has now turned bullish as the market now looks for supply to drop off slightly and price pressure to pick up in the long run. The question is when will the market turn in oil, and many will be watching the coming levels I have pointed out very closely.