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Crude Oil Breaks Below Major Support as Forecast

Commodities / Crude Oil Jul 17, 2008 - 04:21 PM GMT

By: Nadeem_Walayat

Commodities Best Financial Markets Analysis ArticleCrude Oil confirmed its forecast downtrend by decidedly breaking below support of $135. The Market Oracle forecast as of 4th of July 2008 and at a price of $146, has been for an initial downtrend to support of $135, on break of which crude oil would target a trend towards major support at $110.


This analysis was expanded upon in the morning of 16th July 08 in analysis that concluded that crude oil was expected to enter into a more prolonged downtrend that targeted a deep retracement towards a target of $80, identifying several support zones along the way. The reasoning for the trend was in that crude oil had already experienced its spike higher on the cross above $80 and that much of the speculative and investor buying had taken place due to inflation hedging. However the impact of rising oil prices whilst inflationary in the immediate term, especially as second round price rises are triggered, it is deflationary further out as the sharp rise in oil prices would lead to demand destruction and economic contraction. This would be expected to become most evident at the same time as the oil price rises start to filter out of annual inflation indices and therefore leading to falling inflation.

The immediate technical picture suggests a trend towards $120, from where an bounce can be expected before crude oil reaches its swing target of $110.Whilst the longer-range forecast is for a down trend towards $80 with possibility of a spike as low as $60, however there are the risks of black swan events such as speculation of an attack against Iran which would lead to sharp rallies in the oil price. In this respect recent analysis concluded that the risk of an actual attack is put at just 20% on the basis of which the forecast for an unraveling of the use of crude oil as an hedge against inflation was made.

Recent Crude Oil Analysis

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Kaliskus
18 Jul 08, 07:05
Gold relation to oil

What happen to gold, if oil drop to $110. Will it also lower the gold price?


Nadeem_Walayat
18 Jul 08, 07:12
Gold / Oil

On face value the tendancy would be for gold to track oil lower though at a lesser rate, though there are many other factors at play such as the credit crisis, i.e. as a safehaven against loss of confidence in financial institutions.


stan v
23 Jul 08, 22:02
oil demand

what is effect of china and asia generally on oil demand?


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