How OPEC conducts crude oil prices
In the past, OPEC was the dominant oil cartel. You could rely on oil prices being manipulated upwards at regular intervals. Most oil-exporting countries have benefited from this over many decades. The high price created prosperity. With the advent of new technologies (fracking) and the extraction of shale oil, the general conditions changed. Shale oil is now competing with conventional petroleum.
The Saudis forced the price drop
Saudi Arabia's dominance within OPEC is thanks to the fact that oil prices are now down Ride rollercoaster. In order to react to the competing shale oil, Saudi Arabia would have had to reduce its own production by 30%. Instead of reducing the amount of oil, Saudi Arabia came up with the idea of significantly increasing the amount of production. The goal: The oil price should drop so low that the shale oil produced in the USA can no longer be extracted from the ground profitably. As a result, the oil price collapsed with the oversupply of oil. The oil price has hardly recovered to this day.
An economic oil price limit due to shale oil production
Without a reduction in production volumes, there will be none in the coming months give greater rise in prices. The Saudis' strategic goal was to weaken the oil industry within the United States. And that was achieved because the cost-intensive shale oil production had to be reduced.
Whether Saudi Arabia expected the consequences of the oil spill is doubtful. Many oil-exporting countries are so dependent on oil that they have desperately ramped up oil production to the limit. They needed the income to finance their own government spending. Often people worked below the break-even point.
Normality is slowly returning
Worldwide oil demand is growing by almost 2% per year. Since June, OPEC has been somewhat more disciplined in oil production. There are small clues that suggest that the days of oil dumping are over. We will probably never see oil prices as low as in previous years. After all, oil is not an infinitely available raw material. The inexpensive and easily extractable oil reserves are limited, and there will certainly be a bottleneck in a few decades.
However, one should not be too hopeful that the oil price will rise rocket-like immediately. As soon as the oil price crosses a certain threshold, it becomes interesting again for the Americans to expand oil production with shale oil. This has given the oil price an upper limit for fundamental reasons.
Image: Consumption forecast for crude oil
Source: BP Statistical Review of World Energy
Trend analysis of crude oil
In order to estimate the future price development, it is necessary to consider the chronological origin of the price decline. Roughly divided, three price phases can be identified.
Image: Long-term chart of the oil ETF with the US abbreviation USO
As a replacement for the real oil chart, the upper one Chart of the oil ETF USO selected. The ETF is based on American WTI oil. We are not necessarily interested in the price of the oil, but in the price movements of the oil. The movements are easier to analyze with the USO because the maturities of the oil futures are short. To determine the oil price in US dollars, you can multiply the ETF rate by approximately 4.36.
The three dominant price phases
The first significant movement is (1) marked in the chart. Starting from the high in 2008, the oil price plummeted. The result was a price reduction of 81% within seven months.
Then there was a long sideways trend (2) that lasted over five years. This is an atypically long phase of a sideways market. It shows that the oil market has no free price formation and is controlled by various interest groups.
From mid-2014 there was a further downward trend formation (3), which did not bottom out until February 2016. For now, that seems like a final low. The most important feature in the downward movement (3) is that the trend channel has been broken. Only if the downward trend loses its impact will there be a chance for the bulls. The momentum is with the bulls. How long this lasts depends on the fundamental framework.
The rough trend picture looks as follows:
Long-term trend on a monthly basis: short
Medium-term trend on a weekly basis: short
Short-term trend on a daily basis: flat
If one takes the time-related trends as a yardstick, one could assume that the next stronger price movement should be a new downward wave. The conclusion would be too simple. The oil market is influenced by the oil producing countries and corporations. Depending on the decisions the "oil powers" make, the oil price can jump in any direction.
Image: Daily chart of WTI oil in US dollars
Short-term analysis of the oil price
The upper chart shows the short-term situation with the oil price. After the low point in mid-February, the oil price recovered well. In 2016 it then increased by up to 60%. The high price increase was not without effect. Short-term traders have probably taken quick gains and the price has dropped again. After all, seen from the low, the price is still up 35%. The drawn trend fork (pitchfork) is the yardstick for future courses. The trend fork is pointing upwards. This shows the bullish tendency. However, the lower trend line of the fork must not be broken. As soon as the closing price is below the line, the chart picture changes dramatically. The bears would have taken the scepter again and would try to drive the course to this depth. The chart shows that the price is not far away. At $ 43.50 there is a little support. That could be the last small barrier.
Price targets and probabilities
There is a volume profile on the right edge of the chart. The characteristics of the profile show us where there is resistance or support and which price level is attractive. The price range around $ 47 and $ 51 is particularly attractive. The areas in the upper chart are marked as price targets. Because the $ 47 price mark is nearby, it should be the next price target for the coming trading days. However, if the price does not go in the direction of $ 47, this must be regarded as a warning.
Buy crude oil online - Buy recommendation: WTI oil
Price information for WTI -Oil Target price: USD 52.00 Interim target: USD 48.00 Stop loss: USD 42.00
Alternatively, you can also trade on the German stock exchanges.
There is, for example, the oil ETF with the WKN A0KRJX
Price target: 7.40 euros Interim target: 6.90 euros Stop loss: 6.15 euros
If you choose the German OIL ETF, please note that WTI oil is generally traded in US dollars. The oil ETF in euros is therefore only a "spin-off". The EUR-USD exchange rate always flows into it. This means that the price movements between the two trading values are not linear.
If you want to benefit from the short-term stock recommendation, you can buy the stock directly or with Derivatives work. Note that derivatives include leverage and therefore increase the profit and loss potential. In extreme cases, a total loss is even possible.
Stop loss: The stop loss is initially set as an initial stop and has the function of a maximum loss limitation. Price target: The price target is the exit point for the forecast market movement. Stopover: When the stopover is reached, the position is in profit. At this point we take a partial profit and we sell 50% of our position. At the same time, the stop loss is adjusted to the personal entry price. This enables us to close our position without loss, even if the market later turns against us.
Risk warning: The trading values recommended by Christian Lukas are usually speculative. As an investor, you should always be aware of the risks. Despite careful research, it can happen that the forecast does not match the actual development. It is expressly warned not to spread the investment funds over a few securities. Due to the speculative risks associated with securities investments, securities purchases should generally not be financed on credit.
As a precaution, we would like to draw your attention to the fact that the financial analyzes and recommendations on Christian Lukas contained in individual financial instruments provide individual investment advice from your Cannot replace investment advisors or investment advisers. The analyzes and recommendations are aimed at readers who are very different in their investment behavior and objectives. Therefore, the analyzes and recommendations do not take your personal investment situation into account in any way.
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