So far the oil crash has been un-eventfull, but analysts make it out like it’s the end of the world. The talking heads will always find a reason, “Why” oil or any asset has crashed because it’s their job!
The news is all about fundamentals, but fundamentals are always lagging indicators and change like the wind just as fast.
The fundamentals I find important is the COT (Commitment Of Traders)report, Market Vane Report, and the net long or net short positions of the traders. Right now, oil is just a bit above the 200-day MA.
Today the Gold/Oil ratio hit 22.41:1 which is the cheapest oil has been all year when we use gold as money. At 22:1 this is not nearly extreme enough to expect a huge rally to bounce from, as 30: would start getting close to being oversold.
That is a big jump in inventory levels, but it’s more profitable to store oil at low prices as the smart traders that do that use big crude carriers as floating storage units. That usually happens near a big glut, which I don’t see just yet.
If by some odd chance that the world calls it an “Oil Glut”, then I know the oil bearish phase is over, and a new bullish phase will start. You may laugh about that, but its not rocket science folks. The first glut in late 1999 turned $10 priced oil into a $147 oil price by the 2008 peak. The experts went nuts in 2008 forecasting huge price gains still to come, but what really happened is the oil price reversed and crashed to about $34! During that same time, oil traveled from a Gold/Oil ratio of 25:1 to 9:1 in about 8 years.
Oil markets have always moved in the opposite directions than what the fundamentalists are telling us! All the squawking about $100-$300 oil just being around the corner has dried up!
The smallest move up in the price of oil can bring back any $100 price forecast very quick.
At the intraday scale, it sure looks like a potential expanded pattern is in progress, where some violent upside can still happen. I don’t think this decline is resolved, as another zigzag may yet develop but it’s still too early to tell.