Long term I feel like the oil market reset years ago, and it’s climb to $76 was the beginning of a new bull market, although it may not last forever as electric cars and renewable energies undercut petroleum perpetually into the future, matched with greater production and increasing social disdain.
Especially now the market supply of oil is massive, with the US recently becoming the number one producer. And the mechanics of oil hedging are so “efficient” – that selling pressure on this market is extraordinary. Mexico hedges their oil production through US banks every year, along with US oil companies, and I’m sure several other countries are involved as well.
But I feel like they all know oil under $50 is a losing proposition for everyone, and probably have a fairly certain understanding among market participants to let up this time…
Oil companies may ALL have agreed to close their hedges at $50 – the exact point of profitability for the fracking industry.
And the retail side of oil (like most markets), is long. When “risk is on” market participants buy, so when the Oil companies buy to close their hedges, the broader market will exacerbate that uptrend.
And my feeling is that the fundamental agreed-on price or psychological buy price in oil is now $50 as you can see here – along with a fairly clear Elliott Wave count to the upside, where we have a 1-2,1-2 setup and we could be going into the 3rd of a 3rd wave.
If you think in terms of inflation, oil at $50 now is probably $10 in 1950 dollars.
I will be long oil with stops at $50.