Tuesday, August 4, 2015

Crude Oil View

Not much to do in this type of market.  Best thing to do is just position trade this bore.  The bore will eat up daytraders trying to make their daily bread.  Looking at the big picture, the S&P looks like it is consolidating for a move higher.

Crude oil is in the last stages of a bear market, as you get hate and disgust at the incessant downtrend.  I am not a believer that crude oil will stay low for longer.  Shale oil supply will shrink noticeably if you keep WTI under $50.  Price is a magical element in commodities markets for reducing supply and increasing demand.  Of course, price works with a lag.  You will get the reduced crude oil supply next year, not this year.  By that time, the market will have realized this and price will have already bottomed and be heading towards an uptrend.

I am not saying that crude oil has bottomed.  I am just saying that if you have a long term horizon (over 1 year), you will make money buying crude oil at these levels.  It doesn't mean that there won't be a short term move lower to wash out the speculative longs.  But these prices are not long term sustainable in crude oil.  I am not long crude oil, but it is something that I am looking at as a potential long later this year.  Seasonally, crude oil is weak in November and December.  That would be the time to look for a value long.  Nothing actionable for now, just something that I am thinking of in the back of my mind.

Given the slow trading these days, I will be taking a blog break.  Back next week.

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