Crude Oil has seen everything in last 3 years. To understand new trend - it's important to understand what Crude has done so far
A Gigantic Collapse triggered by breakdown below 200 dma
Was the above move surprising? The size of the move yes but not the move.
Brent Crude is ready for big move. Here’s why? http://t.co/b41kS50pvc
— Deepak Singh (@smarket) June 4, 2014
The Fundamental reasons were there:
USA becoming a major player in Crude Oil production. See this tweet - April 2014...collapse started in June-July 2014
The reason: US is producing Oil like crazy. Crude oil production in the US has risen to the highest level since 1988 pic.twitter.com/QmTSofwlFi
— Deepak Singh (@smarket) April 24, 2014
And the second reason: Dollar
USD making a strong comeback. It means end of minor rally in Gold and Crude.
— Deepak Singh (@smarket) July 7, 2014
All the necessary conditions were there for the big downmove
Why it's important to focus on Price Action because it keeps telling the real stuff
This is what market was telling back then even when Crude was trading near $100 - Geopolitics is not going to drive Oil prices
Ukraine, Iraq, Syria, Israel-Palestine in total mess. But who cares. Brent Crude has declined to $102. Lado Maro kya farak padta hai 🙂
— Deepak Singh (@smarket) August 28, 2014
This is what experts were saying
REALLY " If Iraq's oil supply goes offline, crude prices could hit $150-$200 a barrel.. T. Boone Pickens, founder of BP Capital Management"
— Deepak Singh (@smarket) June 16, 2014
The Decline changed the Fundamentals of Oil for Good:
What people are missing to read about this Crude fall?: US is now major energy producer and shale is going to cap any crude rally.
— Deepak Singh (@smarket) January 14, 2015
Crude Oil bounced back from below $30 to $42. Now the question: What's the fair price considering the New Fundamental - The decline happened because of right reasons
As per this week report: US now has crude inventory of more than 500 mn barrel...last time the crude inventory was this high in 1930
— Deepak Singh (@smarket) March 3, 2016
A new thing happened back in May 2016 - Price Action started confirming that Oil does not want to go down below $40
Back to Good Old days...Crude bouncing on random news
Yahan Pipe fata...wahan aag lagee.. https://t.co/sGBtjgKAHR
— Deepak Singh (@smarket) May 5, 2016
But even at $40 - OPEC was in deep pain and they had to do something
OPEC decided to fight back in 2016 by getting serious on protecting downside. It worked hard to get agreement on serious production cuts
OPEC succeeded in pushing the Oil prices from $40 to $52+. But this rally was more to restrict downside because fundamentals had not changed. OPEC production cut resulted in US getting back into high production mode again, which started resulting in more inventory. As a result Oil sold off.
— Fabio Vanorio (@fabio_vanorio) March 9, 2017
Here's the New Trend for Crude Oil - Rangebound Trade
1. Downside Protected - OPEC, Reflationary environment
2. Upside Restricted - US Oil Production
Bias: Upside in near term. It means there will be takers for Crude at lower prices.
Crude Oil is more likely to trade between $45 and $60 now for long long long time to come. Here's one new fundamental emerging
In 10 years time: Crude will not be the main fuel powering economy. It will be Natural Gas and Solar power as it will be super cheap
— Deepak Singh (@smarket) January 5, 2017
The New and Established Fundamental
Crude eventually will settle down in $40-$60 range and it will be boring asset with world flushed with Oil thanks to fracking
— Deepak Singh (@smarket) November 29, 2016
Thanks for your time. I hope the article helps you understand the power of charts. Please share your thoughts, comments below. I will highly appreciate that. Also, do share the article with your friends if you like it
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers